Price above support

The price is above a support level, where the stock has previously turned upwards. Many investors may consider it cheap if it falls towards support again, and may then wish to buy.

Support is where many buyers are thought to become active. It is normally assumed that the stock will not fall below support. Support is thus often used to calculate the downside potential in the stock, especially for short term investors. A stock with a long way down to support has a bigger downside than a stock near support.

Especially in rising and horizontal trends, support expresses the downside potential in the stock. If, at the same time, there is little to no resistance above the current price, the upside potential tends to be high.