Support, Resistance & Price Action

Q1. (4 marks)

• Support: a price level where buying interest (demand) is strong enough to halt or reverse a downward move — price tends to "bounce" up. (1.5)
• Resistance: a price level where selling interest (supply) is strong enough to halt or reverse an upward move — price tends to reverse down. (1.5)
• Difference: support lies below current price and stops falls; resistance lies above current price and stops rises. (1)

Q2. (4 marks)

• Role reversal: once a level is decisively broken, it flips its function — old support becomes new resistance and vice versa. (2)
• Example: If a stock breaks below a support at $100$, that $100$ level then acts as resistance on any subsequent bounce back up; sellers step in there. (2)

Q3. (4 marks)

• Supply zone: an area (price range) above current price where selling pressure previously overwhelmed buying, causing a sharp drop; price is expected to fall/reverse down on return. (2)
• Demand zone: an area below current price where buying pressure previously overwhelmed selling, causing a sharp rise; price is expected to rise/reverse up on return. (2)
• (Zones are ranges, unlike single-line S/R levels.)

Q4. (4 marks)

• Swing high: a peak/candle whose high is higher than the highs of the candles on either side. (1.5)
• Swing low: a trough/candle whose low is lower than the lows of candles on either side. (1.5)
• Minimum confirmation: typically 2 candles (one on each side); commonly a 3-candle pattern (centre pivot + 1 on each side). (1)

Q5. (4 marks)

• Breakout: price closes decisively beyond an S/R level with follow-through and (often) volume, signalling continuation. (1.5)
• False breakout: price briefly moves past the level but fails to hold and reverses back inside. (1.5)
• Two signs of a false breakout (any two, 0.5 each): low volume on the break; long wick/rejection candle; quick close back inside the level; no follow-through/failed retest. (1)

Q6. (4 marks)

• Retest: after a breakout, price returns to the broken level to test it as new support/resistance. (2)
• Confirmation: traders wait for the level to hold (e.g. a rejection candle or bounce) to filter out false breakouts, improving probability and giving a tighter, lower-risk entry with a clear stop. (2)

Q7. (4 marks) Any two well-explained reasons (2 marks each):

• Traders place orders (stops/targets/limits) at round numbers, clustering liquidity there. (2)
• Psychological anchoring — round numbers are easy reference points, so collective behaviour reinforces reactions at those prices. (2)
• (Also acceptable: option strike prices, institutional order placement.)

Q8. (8 marks) (a) Formulas (1 each = 3): $PP = \frac{H + L + C}{3}, \quad R1 = 2\,PP - L, \quad S1 = 2\,PP - H$

(b) Substituting $H=220$, $L=200$, $C=210$: (5) $PP = \frac{220 + 200 + 210}{3} = \frac{630}{3} = 210 \quad (2)$ $R1 = 2(210) - 200 = 420 - 200 = 220 \quad (1.5)$ $S1 = 2(210) - 220 = 420 - 220 = 200 \quad (1.5)$

Q9. (4 marks) — any four (1 each):

• Read raw candlestick patterns / bar structure directly.
• Identify and trade from horizontal S/R levels and zones.
• Follow market structure — higher highs/lows (uptrend) vs lower highs/lows (downtrend).
• Trade breakouts and retests of key levels.
• Watch price rejection (wicks) at levels for reversal signals.
• Trade with the trend / use swing points to define trend.

[
  {"claim":"Pivot Point PP = (H+L+C)/3 = 210 for H=220,L=200,C=210","code":"H,L,C=220,200,210; PP=(H+L+C)/3; result=(PP==210)"},
  {"claim":"R1 = 2*PP - L = 220","code":"H,L,C=220,200,210; PP=(H+L+C)/3; R1=2*PP-L; result=(R1==220)"},
  {"claim":"S1 = 2*PP - H = 200","code":"H,L,C=220,200,210; PP=(H+L+C)/3; S1=2*PP-H; result=(S1==200)"}
]