Polarity Principle

The polarity principle states that once a support level is broken, it becomes a resistance level, and once a resistance level is broken, it becomes a support level. This phenomenon is based on the shift in market psychology and the change in the positions of market participants.

When a support level is broken, traders who were long are now in a losing position and may look to sell their holdings when the price returns to that level, turning it into resistance. Conversely, when a resistance level is broken, sellers are now in a losing position and may look to buy when the price returns, turning it into support.

This principle is a cornerstone of technical analysis and is used to confirm the strength of a trend. It helps traders identify potential retest points for new entries.