In technical analysis, how are Support and Resistance levels defined, and what is the concept of 'Role Reversal'?

[ A ]Support is a price floor where buying demand halts a decline; Resistance is a price ceiling where selling supply halts an advance; 'Role Reversal' occurs when a broken support level flips to become a new resistance level (or broken resistance flips to become support) as market psychology and orders reposition.[ CORRECT ]

[ B ]Support is an annual cash bonus paid by the stockbroker, and Resistance is a government tax penalty.

[ C ]Support and Resistance levels are fixed prices that never change across 100 years of stock trading.

[ D ]Role reversal occurs only when a company changes its corporate statutory auditor.

Takeaway

Option A is correct: Support is a price floor where buying demand halts a decline; Resistance is a price ceiling where selling supply halts an advance; 'Role Reversal' occurs when a broken support level flips to become a new resistance level (or broken resistance flips to become support) as market psychology and orders reposition.

Derivation

Support and Resistance are central technical analysis anchors: (1) Support represents a price level or zone where buying interest/demand is sufficiently concentrated to overcome selling pressure, acting as a 'floor'. (2) Resistance is a price level where selling interest/supply overcomes buying demand, acting as a 'ceiling'. (3) Role Reversal (Polarity Principle): When price decisively breaches a major resistance level on volume, that level flips into a strong support floor on subsequent pullbacks (as trapped short-sellers buy to break even and sideline buyers enter). Conversely, broken support flips into new resistance on relief rallies. This tests support/resistance theory. A common mistake is treating levels as single static numbers rather than zones.

Why the others fail

B — Support is an annual cash bonus paid by the stockbroker, and Resistance is a government tax penalty.

Support and resistance are technical price levels on charts, having no relationship to broker cash bonuses or tax penalties.

C — Support and Resistance levels are fixed prices that never change across 100 years of stock trading.

Support and resistance levels evolve dynamically as market prices, volume zones, and investor psychology shift over time.

D — Role reversal occurs only when a company changes its corporate statutory auditor.

Role reversal is a market price action phenomenon, completely unrelated to corporate auditor appointments.