Support And Resistances ( Why Exist?)

All market participants, be it a long term investor or a short term investor, have heard the words "Support" and "Resistances". Everybody understand their meaning, but only a small number of persons i talk with knew why they exist.
Recently i got a chance to meet a person who has an experiance of more than 15 years in this line, he tried to explain to me the reasons behing supports and resistances, this is what i understand.
Please all friends , if somebody can add a value to my understanding below please comment.

Support And Resistances
Support and Resistances are price points where lot of activity happens. Better call them pivot points.

1.) Every investor , be it a short term investor or a long term investor invests with a target in mind. These targets are not decided by the Resistances given by companies but price points derived by the investor himself by judgeing the performance of the company.It could also be because of the percentage return required by an investor.

2.) Another Reason , that over a period of time these get stronger is because once a stock price stops or remains at a particular level large quantities of shares changes hand, due to this groups of investors get formed. These investors have one thing in common , that is the price range ( short range) at which they have bought the stock. For Example, RPL has lots of investors who have bought the stock at a price level of Rs 60.
Because of these investors , any time a stock reaches this level , supply gets dried out as they are not willing to sell their shares at the level they purchased and hence it becomes a support level.
Similar arguments applies for Investors who sells there shares also. For example, In reliance many investors sold there shares in the range of 2900 and 3100 , they are not willing to buy shares at these prices, if stock goes up, they can think of buying it again, or if it falls they can think of doing bargain hunting. But at the same level, only few buys again, due to this phenomenon, that range can become a resistance level as buying dries down.

3.)Round figures are one of the important pivot points because, at these points profit booking or bargain hunting generally comes, and hence they generally becomes Support or Resistances.

These Support levels and resistances gets made and break everyday, but if seen in the graph with these points in mind do provide good entry and exit points.
Please do leave your suggestions and comments.