Zone Of Support - Definition

A "zone of support" is a term that is used to refer to stock options that begin to earn support from the investment community. As a result of this support, the price of the stock begins to move upward as the trading of the shares begins to increase. The support is not usually tied with a specific price, but rather a price zone or Range in which the support appears to be ongoing. The questions of how high the price may rise and how far it can drop while still retaining that support helps to determine the parameters for the zone of support. The higher the Volume of trading in the zone of support, the higher the point at which actual support will most likely occur.

There are a number of factors that can affect a zone of support. The development of new technology that threatens to make the product line of the underlying company obsolete or at least less in demand will in turn impact the status enjoyed by the stock among investors. Concerns about the leadership of the company, such as with the resignation and selection of a new company president or CEO, may also slow the Momentum of the stock price, causing it to fall rapidly. Natural disasters, the outcome or political elections, or a significant change in the general economy that affects consumer buying habits could also lead to shifts in the zone of support.

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