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Shares of Super Micro Computer, Inc. (NASDAQ:SMCI) are getting pummeled. A research firm has alleged that the company illegally manipulated its accounting records, along with other improprieties.
Whether or not these allegations are true remains to be seen. But the stock is in a freefall and many traders and investors are wondering where it will end. This is why our team of trading experts has made it our “Stock of the Day.”
If the shares keep heading lower there is a good chance the selloff ends or pauses around $355. They may even reverse and rally off this level.
There is a reason for this. It has to do with trading and investing psychology.
As you can see on the chart, there was resistance for the stock around $355. In August 2023 and January 2024 when it hit this price, the sellers overpowered the buyers and pushed the price lower.
Now that the price has risen, many traders and investors who previously sold are feeling regret. Some are now looking to buy back their shares but are determined to do so only if they can repurchase them at the price they originally sold for.
As a result, if the shares get back to their price, some of these remorseful sellers will be placing buy orders. If there are enough of these orders, it could create support and put a floor under the price.
Sometimes stocks get to support and then reverse and move higher. This happens when buyers become impatient.
They begin to worry that other buyers might come along, willing to pay a higher price, which would attract the sellers’ attention and leave them out of the deal.
As a result, these impatient buyers raise the price they are willing to pay. Other impatient buyers see this and do the same thing. This may result in a snowball effect that can move the stock higher.
The allegations against SMCI are very serious, and time will tell if they are true or not. But regardless, if the stock drops to around $355 it may end up turning.
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Posted In: SMCI
