CA Manish Singh: 
Hello everyone, and welcome to Chapter 7. 
Till now, we have learnt what candlesticks are, how they are formed, how bullish and bearish patterns appear, and how candlestick combinations indicate trend shifts. 

In this chapter, we will understand a critical concept that traders use for confirmation: Support and Resistance. 
Patterns do not appear suddenly, and they rarely work in isolation. When a candlestick pattern appears at a key level, it becomes far stronger and more reliable.

What This Chapter Covers: Why Support and Resistance Matter 

CA Manish Singh: 
In trading, you often get a first level of confirmation from a candlestick pattern itself. 
But the probability of success increases significantly when the pattern forms at a support or resistance level. Since trading is a game of probabilities built on past data, we always try to add multiple confirmations before entering a trade. 

If a bullish pattern appears at a support zone, we have: 
• First confirmation: the bullish pattern 
• Second confirmation: the support level 

This double confirmation increases the chances of being right in the trade. 

Similarly, if the pattern appears at a random location on the chart, the probability of success reduces because there is no additional level supporting the trade. 

In any trade, there are three possible outcomes: 

1. You are correct
2. You are partially correct
3. You are incorrect 

Multiple confirmations help shift probabilities in your favour. 
Let us now learn how support and resistance zones are created on the chart. 

How Support and Resistance Levels Are Formed 

CA Manish Singh: 
Let us now look at a live chart to understand how these levels form. 

On your screen, you can see the Nifty 50 chart on a 5-minute timeframe. 

Identifying Resistance 

Look at the previous day. 
On 1 July, the market took resistance near 25,550. 
Again, the next day, the market struggled around 25,600. 
Even now, the market is hovering between 25,550 and 25,600, failing to break above this zone. 

Why is this happening? 
Because this entire region has acted as a resistance zone for two days. 

How we identify a resistance zone: 
• Price repeatedly moves into the zone but fails to break above. 
• Even if it crosses temporarily, it quickly falls back. 
• Candles near the zone often create upper wicks, showing selling pressure. 

You can observe: 
• A wick formed here 
• Another wick formed immediately after 
• Even with a large bullish candle, the next candle created a wick 

This indicates sellers are active in this zone. 

To mark resistance, we use the nearest round levels. 
So we mark 25,570 as the resistance zone. 

Identifying the Next Resistance 

If the market breaks 25,570, the next hurdle is visible only when we scroll back. 

Looking back, we see a previous hurdle near 25,645 to 25,650. 
So the next resistance becomes 25,650. 

If the market breaks above 25,650, it enters an uncharted zone with round-number hurdles roughly every 50 points: 
• 25,700 
• 25,750 
• 25,800 

Identifying Support 

CA Manish Singh: 
Now look at the downside. 

The market repeatedly fell and bounced back from around 25,530. 
This happened multiple times. 
You can also see lower wicks forming at this zone, indicating buyers are stepping in. 

This means 25,530 is a clear support zone. 

Support is marked exactly like resistance: 
• A cluster of candles forming at the same region 
• Lower wicks showing strong buying interest 

Support and resistance zones often act as hurdles when price revisits them. 

Live Market Example: How Breakdowns Work 

CA Manish Singh: 
Now observe the live candle. 

A strong bearish Marubozu candle has formed. 
The candle stretches roughly from 25,540 to 25,500 and is closing fully in red. 
This gives us a confirmation of bearishness. 

More importantly, this candle is breaking the 25,530 support zone. 

This is a strong signal that a bearish trade may be possible. 

But we always wait for the candle to close. 
If we are analysing on a 5-minute timeframe, we must wait for the 5-minute candle to close, because: 
• A candle may look bearish initially 
• But before closing, the price may reverse 
• A full lower wick might form 
• The candle may turn bullish 

Only the closing candle gives confirmation. 

Once the candle closes below support, we place the stop-loss at the midpoint of the breakdown candle. 

Finding the Next Support Levels 

CA Manish Singh: 
When support breaks, the next levels are: 
• 25,470 
• 25,420 
• 25,380 

These levels come from previous hurdles. 

A key rule to remember: 
When resistance breaks, it becomes support. When support breaks, it becomes resistance. 

This is visible on the chart: 
• The previous support at 25,530 will now act as resistance 
• The previous resistance at 25,470 will now act as support if price approaches again 

This helps us plan trades zone by zone. 

Summary and Takeaways 

• Candlestick patterns become stronger when combined with support and resistance. 
• Support forms where buyers consistently step in. 
• Resistance forms where sellers consistently step in. 
• Wicks near these zones show rejection and confirmation. 
• Once broken, support turns into resistance and resistance turns into support. 
• Always wait for candle closing before taking a trade. 
• Multi-level confirmation increases probability of success. 

In the next chapter, we will learn how to add volume analysis and other tools for additional confirmation. 

Disclaimer: Investments in securities markets are subject to market risks. Read all related documents carefully before investing.