Lucid Group, Inc. (NASDAQ:LCID) shares are surging on Wednesday after they closed down more than 16% yesterday on concerns of a possible bankruptcy.
There is a chance the stock is at support, and sometimes stocks rally after reaching support. This is why Lucid is the Stock of the Day.
As you can see on the chart, yesterday was a significant day for Lucid. It opened at $5.45. Then it dropped almost 60% to $2.37, before trimming those losses.
A reversal kicked in, and the stock rose from that low mark. The closing price was $4.65. You can see on the chart that this level was support in June.
Breaking a support level is considered to be a bearish dynamic. Support is a large group of investors and traders who wish to purchase shares.
If the support breaks, meaning that the stock trades and stays below it, it is a sign that the people who created the support with their buy orders are gone. They have finished or canceled their orders.
With this demand off the market, sellers will be forced to offer their shares at a discount to draw buyers in. This results in a downtrend.
Sometimes, during the course of the day, it appears as though the support is breaking. But the buyers are still out there. They are just hiding or staying on the sidelines.
They think that if the sellers believe there are no buyers around, they will push the price even lower. Then the buyers will be able to finish their orders at a reduced price.
But if the buyers are still around and want or need to be finished by the close, they can come into the market and drive the shares right back up to the support level. This is what happened with Lucid yesterday.
This price action is an illustration of why some traders use the closing price when making their decisions. This price can be a more accurate illustration of the supply and demand dynamics in a market than the Intraday prices.
This reversal was so strong that there is a good chance the move higher continues. The worst may be over for Lucid.
LCID Stock Price Activity: Lucid Group shares were up 19.81% at $5.54 at the time of publication on Wednesday, according to Benzinga Pro data.
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