Technical indicators like moving averages, Fibonacci tools, and pivot points are used to identify supply and demand zones that act as support and resistance levels. Support occurs when a downtrend pauses due to concentrated demand, while resistance occurs when an uptrend pauses due to concentrated supply. To identify support and resistance, horizontal lines are drawn connecting three or more past price points to represent areas where price has previously paused or reversed direction. These levels can then be used to set targets for trades by looking for prices to reach the next resistance or support level.