Support and Resistance - The price of a security is the result of the relationship between the old fashioned supply and demand.

This relationship is based on the investors expectations. A higher level of demand means more buyers and the price therefore goes up.
A higher desire for supply from investors means more sellers and the price goes down.

When the price goes down to a certain level the buyers feel investing in a security is worth while, at the same time the sellers do not want to sell the securities cheaper, so the price goes up.

On this chart, observe how the price changes and goes up each time the price falls to a certain point.

This is the support level.

Resistance is the other side of the coin. On a certain level investors feel that the price is over there expectations and begin to sell.

Here we see that every time a price hits 340 the sellers take over and the price falls.

This is the resistance level