Market Polarity

Market polarity refers to the phenomenon where a previous support level transforms into a resistance level after being broken, and vice versa. This concept is rooted in the collective memory of market participants who adjust their expectations based on past price action.

When a support level is broken, traders who were previously buying at that level may become sellers, viewing the breach as a sign of weakness. This change in behavior reinforces the level as a new ceiling for price action.

Conversely, a broken resistance level becomes a new floor as traders who missed the initial breakout look to buy on a retest of the level. This structural change is a fundamental component of technical analysis, providing traders with strategic zones for placing stop-losses and take-profit orders.

It demonstrates how historical price levels continue to influence future market psychology.