Shares of Snap Inc. (NYSE:SNAP) are trading higher Thursday. The stock is in a strong uptrend. Some analysts attribute the move to the company's announcement of its new fifth-generation Spectacles and operating system, Snap OS 2.0.
‘Gaps tend to refill' is an old Wall Street expression, and it's true. This means that Snap may continue to move higher. This is why it is our Stock of the Day.
Resistance is a price level or a narrow range where there is a large number of shares for sale. If a market is moving higher, it's because there are more shares to be bought than there are to be sold.
Those who wish to purchase shares are forced to outbid each other and pay higher prices to attract sellers. This forces the stock into an uptrend.
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One of the main reasons why resistance forms is due to remorseful or regretful buyers. These are people who decided they made a mistake when the stock fell below their purchase price. Some of these investors and traders choose to hold onto their losing positions.
But they also decided that if they could eventually do so, they would sell their positions and exit at breakeven if possible. So, if and when the stock returns to their buying price, they place sell orders. A large number of these orders will cause resistance to form.
As you can see on the chart of Snap, the stock recently gapped down from around $9 to the $8 level. This means It closed around $9, and the next day it opened around $8. There was no trading between these levels, so it appears as a ‘gap' or blank space on the chart.
If there was no trading, then there was no one who bought shares who would be trying to sell if Snap moves back through the range in the opposite direction. This means there may not be a large amount of sell interest in this range.
Buyers will be forced to bid premiums to acquire shares, and this could push the price higher. Snap may be about to refill a gap.
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