Synopsys, Inc. (NASDAQ:SNPS) shares are trading lower Monday. But they are testing an important price level. A large move may be imminent. This is why Synopsys is the Stock of the Day.
In the financial markets, certain price levels have more importance than others. These are called support and resistance levels.
At support levels, there are large quantities of shares to be bought. If a stock is in a downtrend, there aren’t enough buy orders to absorb all of the sell orders. Sellers sometimes offer their discounted shares to draw buyers into the market.
This can create a downtrend. These downtrends end at support levels.
The opposite is true at resistance levels. There are large quantities of shares to be sold. If a stock is in an uptrend, there aren’t enough sell orders to fill all the buy orders.
Buyers then outbid each other to attract sellers. Uptrends end when they reach resistance levels.
As you can see on the chart below, $385 was resistance in December 2021. It was also resistance in August 2022.
Prices that had previously been resistance can become so again because of remorseful buyers. These people regret buying at the resistance when the price drops. They decided to sell if the price returns to where they bought their shares so they can get out at breakeven.
The large quantity of these orders created resistance at the level again.
The $385 level became support in April 2025. It was also support in September, November, and March of this year. Now it is support again.
Prices that were previously support can become so again due to seller’s remorse. People regret selling after the price rallies. Many decided to buy their shares back if they could eventually do so.
When Synopsis fell back to this former support level, these regretful sellers placed buy orders, and they created support at the level again.
Successful traders can recognize important price levels. This allows them to anticipate changes in trends, and it leads to profits.
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