Datadog, Inc. (NASDAQ:DDOG) continues to trend lower on Thursday. It fell by more than 14% yesterday after the company reported its earnings. The shares have reached an important price level. This could put a floor under the price. It is why Datadog is the Stock of the Day.
One of the mysterious things about the financial markets is that certain levels matter, and others don’t. As you can see on the chart, the $190 level has been important for Datadog.
The shares were in an uptrend late last year. When they reached $190, sellers came into the market. Their orders created resistance.
A reversal and selloff followed.
This happened because some of the investors and traders who wanted to sell became impatient. They thought other sellers may undercut them.
Buyers will go to the seller who is willing to sell at the lowest price. They didn’t want to miss the order, so they reduced their prices and offered their shares at a discount.
Other impatient sellers saw this and did the same thing. It became a snowball effect that forced the shares into a downtrend.
This resistance was broken in May. When this happened, many of the people who sold at the resistance decided that their decision to do so was a mistake.
Some also decided that if and when they eventually have the opportunity to buy their shares back for the sale price, they would.
So yesterday when Datadog dropped back to $190, these remorseful sellers came into the market as buyers. So many of these buyers created support at the former resistance level.
Sometimes stocks rally after they reach support.
This happens when some of the buyers who created the support become anxious and impatient. They know sellers will go to whoever is willing to pay the highest price.
As a result, they increase their bid prices. Other anxious buyers see this and do the same. This can result in a bidding war that pushes prices Datadog higher.
See More:
Top Value Stocks
Image: Shutterstock
