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In the stock market, when there is a large amount of trading at a particular price, it tends to make that price important. There will be many traders and investors who bought or sold there, so if a stock trends one way or the other and then reverses, eventually returning to the price, many investors will be interested.
If a stock moves through levels with little or no trading and then eventually returns to these levels coming from the opposite direction, there will be little or no interest. That's why NVIDIA Corp (NASDAQ:NVDA) is our Stock of the Day.
It may be about to “refill a gap.”
When a stock closes at one price, then opens at a different price and there is no trading in between these prices, this will appear as a “gap,” or blank space on a chart.
On May 22, Nvidia closed at $94.94. The next day it opened at $102.02. There was no trading at the prices between these two levels.
One of the main reasons why there is support in a market is because of seller's remorse. People sell only to regret doing so if the price eventually climbs higher.
Many vow to buy their shares back assuming they can do so at the same price they sold their shares. If there are enough buy orders, it will create support.
After making a significant move higher, shares of Nvidia reversed. The shares are now approaching the price levels that they gapped up through. If the shares fall back into this range, there is a good chance there won't be significant buy interest.
This means the stock could drop quickly back through these prices. The sellers will have a hard time finding people to buy their shares. As a result, they will need to push the price lower if they want to get the buyers interested.
There are a lot of sayings on Wall Street. Some make sense and some don't. But the saying “gaps refill” is one that does. Nvidia may be on the verge of another rapid move lower.
Photo: Shutterstock
Posted In: NVDA
