How the levels form
A resistance level forms because a meaningful number of sellers decided to sell at roughly that price before. Maybe they bought lower and are happy to take profit there. Maybe they tried to buy at that price once, got burned, and are waiting to get out at breakeven. Whatever the reason, when price returns to that zone, some of those same sellers show up again, supply increases, and the price struggles to push through. Support works the same way in reverse: buyers who missed a level before, or who see it as fair value, step in again when price falls back to it.
Round numbers make this effect stronger, not weaker. The Nigerian Exchange's All-Share Index crossed 100,000 points for the first time in January 2024. A level like that draws attention precisely because it is round. Traders, fund managers and financial journalists all watch the same number, so it becomes a shared reference point even for people who have never drawn a chart in their life. That is the mechanism behind most of what gets called support or resistance: enough market participants paying attention to the same rough price zone that their combined buying or selling actually moves the market there.
Why "exact" is the wrong word
Here is the part traders get wrong. A support or resistance level is a zone, not a line. If a stock bounced off ₦42.50 twice last quarter, that does not mean ₦42.50 is a precise floor and ₦42.30 is free money. Order books do not clear at a single tick. Some buyers place orders at ₦42.80, some at ₦42.30, some at ₦41.90. The zone where buying pressure clusters spans a range of prices, not a single figure. Treat the exact number as gospel and you will get faked out constantly, either buying too early because you overshot slightly through the "line", or selling in a panic because price dipped a few kobo below where you expected the bounce.
The timeframe problem makes this worse. A level that looks like solid resistance on a daily chart might sit in the middle of nowhere on a weekly chart, and vice versa. Two analysts looking at the same stock can draw two different resistance lines and both be reading the chart correctly, because they are looking at different windows of history. There is no single correct support level for a stock. There is only the level that matters for the timeframe and the position you are actually looking at.
Self-fulfilling, up to a point
Support and resistance also carry some self-fulfilling weight, and that is worth being honest about. If enough traders believe a level will hold, they place orders around it, and that buying or selling pressure can itself cause the bounce or the rejection. This is real. It is also not reliable enough to lean on alone. A level holds until the reason it existed stops mattering, usually because new information changes what buyers or sellers think the stock is worth. A strong earnings surprise, a dividend cut, a currency move that changes input costs, any of these can blow through a level that had held for months, because the traders who were defending it no longer have a reason to.
What this means for reading a chart
The practical result is that support and resistance are best used as rough zones for gauging where buying or selling interest has clustered before, not as trigger prices for a decision. A level that has held three times over six months tells you something different from a level that held once, two years ago, and that difference matters more than the exact price at either level. Where a chart alone falls short is in telling you why a level held: whether it was a genuine shift in buying interest, thin volume, or a single large order absorbing the selling on the day. Price charts do not carry that context on their own, and no amount of squinting at a candlestick will supply it.
None of this makes support and resistance useless. It makes them approximate, which is a different thing. A trader who draws a resistance zone as a band rather than a line, and who checks whether the fundamentals behind a stock still support that zone, is reading the chart correctly. One who quotes a support level to two decimal places and treats a one kobo breach as proof the floor has failed is mistaking a rough historical pattern for a rule that was never written down anywhere.