Canadian Securities Course (CSC) Level 2 Practice Exam

What does the term "support level" refer to in chart/technical analysis?

1. Top price willing to sell but unwilling to buy

2. Smooth out fluctuating values

3. Bottom price at which holders are unwilling to sell

4. A pause in a trend

The correct answer is: Bottom price at which holders are unwilling to sell

The term "support level" in chart and technical analysis indeed refers to the bottom price at which holders are unwilling to sell. This notion suggests that there is a price level where demand for a security is strong enough to prevent it from falling further. When prices approach this level, buyers are likely to step in, leading to a stabilization or potential reversal of the downtrend. Essentially, it acts like a cushion that keeps the price from declining below that point, as the interest from buyers tends to increase as the price nears the support level. The other definitions describe different concepts in technical analysis. The point about top price willingness to sell but not willing to buy signifies a resistance level. The idea of smoothing out fluctuating values relates to moving averages or other indicators used to clarify price trends. The mention of a pause in a trend relates more to consolidation phases where prices may trade sideways, but it is not synonymous with support level.