Trading in NVIDIA Corporation (NASDAQ:NVDA) was quiet on Wednesday. But the shares have dropped about 7% over the past week.
The selloff ended at a level that was previously supported. This is why our trading team has made NVIDIA the Stock of the Day.
In the stock market, certain price levels have more importance than others. This can be seen on NVIDIA’s chart.
The low trade on Tuesday was close to $167, which was not a coincidence. There can be support at former support levels, and this level occurred on July 22.
Some of the people who sold at support then regretted doing so when the stock rallied afterward. A number of them decided to repurchase their shares if they could eventually do so at the same price they sold them for.
So, when the stock dropped to this level yesterday, they placed buy orders. There were so many that it created support.
Sometimes a price level can be a resistance for an extended period of time. This was recently the case with the $183 level for NVIDIA.
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The first time the stock reached this price was in July, when it dropped after many of the people who bought shares at around $183 regretted doing so.
Some vowed to sell their shares if the stock returned to their buying price and they could sell at breakeven. So, when it rallied back to around $183 in early August, they placed sell orders. The large quantity of these sell orders created resistance.
This resistance stayed intact throughout August.
Now, NVIDIA is hitting resistance around $172.50. There is resistance at this level because it was previously at support on August 22.
When the shares fell below this support on Tuesday, many of the people who purchased shares at around $172.50 regretted doing so when the price dropped below it.
After the stock rallied back up to this level, some of them saw the chance to exit their positions at breakeven. They placed their sell orders around $172.50, and this created resistance.
Successful traders can identify important price levels. This gives them insight into where a trend may end or reverse, which can lead to profits.
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