Activity Level - Stock Trader Glossary

Activity level is a term used in technical analysis of financial markets to refer to a price level on a chart where significant trading activity has occurred in the past. These levels may be old support or resistance levels, or breakout levels that have previously been identified. Activity levels are important because they can act as key reference points for traders and investors when analyzing market trends and making trading decisions.

Old support and resistance levels are particularly important activity levels because they can signal potential turning points in the market. A support level is a price level where demand for a stock is strong enough to prevent the price from falling further, while a resistance level is a price level where selling pressure is strong enough to prevent the price from rising further. When a stock's price approaches an old support or resistance level, traders and investors will often look for signs of a breakout or reversal to occur.

Breakout levels are also important activity levels because they represent a significant change in market sentiment. A breakout occurs when the price of a stock moves beyond a key resistance level, indicating that buyers are gaining the upper hand and that the stock is likely to continue to rise.

Overall, activity levels are important tools for technical analysts and traders because they provide a clear indication of where significant trading activity has occurred in the past, and can help predict where the market is likely to move in the future. However, it's important to remember that no single technical indicator or chart pattern can guarantee the future direction of a stock's price, and that traders and investors should always conduct thorough research and analysis before making any investment decisions.