Could Coterra Energy Inc. (NYSE:CTRA) be on the brink of a surprising turnaround? As the stock approaches a key support level, traders are watching closely for signs that history might repeat itself in favor of a bullish reversal.
Coterra Energy is quiet on Tuesday. But it may be about to reverse its recent trend and head higher, which is why it’s our Stock of the Day. The chart illustrates how traders can gain insight into where an uptrend or a downtrend may end.
‘Sell at former tops' is a common expression on Wall Street. It refers to the phenomenon where, when a stock rallies back to a price that had previously been a peak or resistance, there is a good chance that it will hit resistance again.
In January, Coterra ran into resistance and formed a top around $29.50. When it returned to this level in March, the same thing happened.
This price action occurs because some of the people who bought at the top in January regretted doing so when the price dropped. When the stock returned to this level, they saw the opportunity to finally exit their positions without incurring a loss.
Read Also: Formula 1 Is Wall Street’s New Money Machine—With Horsepower
The large number of sell orders they placed formed resistance at the same level again.
In November 2024, the shares found a bottom around $22.30 before rallying and heading higher. When they dropped back to this level in May, they once again found support.
This happened because many who sold at the bottom in November came to regret doing so after the price rallied. Some decided that if they could eventually do so, they would buy their shares back at the same price they were sold for.
So, when Coterra fell back to $22.30 in May, they placed buy orders. The large amount of these orders caused support to form at the level again.
Now Coterra is getting close to this important support level. There is a good chance that it finds support and reverses.
Successful traders understand that profits can be made by identifying key support and resistance levels. They know that trends can end and reverse when they reach them. This can lead to low-risk and profitable trading opportunities.
Read Next:
Photo: Shutterstock
