Support & Resistance Zones Explained – Part 2

This powerful—yet deceptively simple—market analysis technique has accurately called some of the most important recent moves, including gold’s $1,500 surge over the past year.

Welcome to Part 2 of my two-part series on one of the most powerful tools in technical analysis: support and resistance zones—a method I rely on heavily both in this newsletter and in my own investing.

If you haven’t read Part 1 yet, I recommend starting there first. In it, I laid the foundation for my minimalist approach to market analysis and explored the mechanics and psychology behind support and resistance levels, which set the stage for understanding the zones we’ll dive into here.

Now that we’ve covered the basics of support and resistance levels, I want to introduce the core concept of this article: support and resistance zones. While levels are useful and do appear in the real world—as we saw with the DAX and copper—it’s actually more common for support and resistance to form within a zone rather than at a single, precise price point. These zones might span areas like $10 to $11 or $2,000 to $2,100, reflecting the natural variability in how buyers and sellers interact around key price regions.

There are several reasons why support and resistance tend to form in zones rather than at precise levels, but one key reason is how traders place their orders. Many have learned the hard way that placing limit or stop-loss orders right on round numbers—like $10—often results in getting stopped out prematurely. To avoid this, they’ll slightly adjust their orders to levels like $9.85 or $10.20, depending on whether they’re going long or short. This behavior spreads out orders around a key price point, creating a bell curve-like distribution of buying and selling pressure—resulting in a zone of support or resistance, rather than a single clean line.

That said, support and resistance zones function much the same as traditional levels: breakouts above resistance zones often lead to new rallies, breakdowns below support zones often trigger further declines, and old resistance zones become supports (and vice versa).

Now let’s take a look at the diagram of a resistance zone below. Identifying and drawing a resistance zone is a bit more nuanced than pinpointing a single resistance level, but it’s a skill that comes with time and practice. Eventually, it becomes second nature—and even fun—and soon you’ll find yourself spotting these zones instinctively every time you look at a chart.

My general method is straightforward: I look for areas on the chart where an asset has made at least two price peaks within a relatively close range. I then mark the lowest peak as the bottom of the resistance zone and the highest peak as the top. This range becomes the resistance zone.

Support zones function just like resistance zones—only inverted. To identify a support zone, I look for areas on the chart where an asset has formed at least two price bottoms (or troughs) within a relatively close range. I then mark the lowest bottom as the bottom of the support zone and the highest bottom as the top. The area between those two points defines the support zone.

Now let’s look at real-world examples of resistance zones, starting with my favorite: gold from 2020 to 2024. During this period, gold consistently traded within a resistance zone between $2,000 and $2,100—a zone I closely tracked and wrote about extensively in my online Forbes column at the time (see example). I identified this zone based on the psychological significance of those round numbers and the recurring price peaks that formed within it—in summer 2020, spring 2022, spring 2023, and again in winter 2023.

In all of my writings—including on the very morning before the breakout occurred—I emphasized that once gold broke above this zone, it would trigger a powerful bull market. And that’s exactly what happened, as I’ll show in the next chart.