Support and resistance:

Support and resistance are the focus of how supply and demand meets. In the financial markets, prices are driven by excessive supply (down) and demand (up). Supply is synonymous with bearish, bears and selling. Demand is synonymous with bullish, bulls and buying. As demand increases, prices advance and as supply increases, prices decline. When supply and demand are equal, prices move sideways as bulls and bears slug it out for control.

Support is a level at which bulls take control over the prices and prevent them from falling lower. Think of support as a floor, when we fall we hit the floor and most of the time; we bounce back up, just like a stock. But sometimes, we fall through the floor, and keep on falling until we hit another floor, just like a stock.

Resistance, on the other hand, is the point at which sellers take control of prices and prevent them from rising higher. The price at which a trade takes place is the price at which a bull and bear agree to do business. It represents the consensus of their expectations.
Support levels indicate the price where the most of investors believe that prices will move higher. Resistance levels indicate the price at which the most of investors feel prices will move lower.

Now, on my chart I will give you an example of what it looks like when these principles are applied. You can see that it is trading in a flat channel, which is just what you want. However, you can apply support and resistance levels upward or downward.
This is the most basic form of technical analysis. All you must do is determining where the support line is and the resistance line is. However, when a price breaks through one of them, you will see a rally based on whatever line was broken. When this happens it is a good idea to stay out of the trade and wait for the price to determine the next support and resistance line. A breakout above a resistance level is evidence of an upward shift in the demand line as more buyers become willing to buy at higher prices. Similarly, the failure of a support level shows that the supply line has shifted downward.

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