Shares of Stellantis N.V. STLA traded lower on Monday. In a move that has investors concerned and confused, CEO Carlos Tavares has resigned. This comes as a surprise because two months ago he said that he would retire in 2026.
As you can see on the chart, shares have dropped over 40% this year. However, a potential bottom may be forming, making it our Stock of the Day.
Markets don't like uncertainty. This means that nervous investors will probably continue to sell and put pressure on the shares. This could continue to force them lower.
Yet, experienced traders can identify key price levels, creating opportunities to profit.
Read Also: Stellantis Market Value Halves In 2024: Why CEO Tavares’ Exit Could Take Things From Bad To Worse
They know that when a stock heads lower and reaches a support level there is a good chance the selloff ends. They also know that stocks tend to rally after they drop to support.
As you can see on the chart, the $11.50 level supported Stellantis in June and July. There is a good chance this level will become support once again.
Support levels can remain intact because of “seller's remorse.”
Some traders and investors sold when the shares hit support, but when the stock quickly moved higher, many regretted their decision to sell.
Some decided to buy back their shares—if they could acquire them at the same price they were sold.
So, when the stock eventually reversed and returned to the selling price, they placed buy orders. This large concentration of buy orders caused support to form at the same price that had previously been support.
This has happened at the $11.50 level for STLA.
Stocks often rally after reaching support, and that could be the case here, presenting potential profit opportunities in the coming days. This typically occurs when investors and traders who established the support through buy orders become nervous, knowing the sellers will move to the highest bidder.
They don't want to miss out, so they increase their bid prices. Other nervous buyers see this and do the same. This can result in a snowball effect, forcing the shares into an uptrend.
It may be too soon to take a position in Stellantis, but some savvy traders will be looking for a rally and an opportunity to profit if the stock reaches the important support level and potentially reverses.
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