Westinghouse (WAB) technical analysis - Westinghouse Air Brake (NYSE:WAB)

Shares of Westinghouse Air Brake Technologies Corporation WAB got crushed yesterday after missing earnings. But they may be about to reverse and move higher.

The shares are oversold and at support. This is why Westinghouse is our Stock of the Day.

As you can see on the chart, the $187 level has been support for the shares since October.

Support is a large group of investors or traders who are looking to buy shares at, or close to the same price. At support levels, there is enough demand to absorb all of the supply of shares that are for sale in a market.

This is why selloffs end or at least pause when they reach them.

Sometimes stocks rally after they reach a support level. That's what happened with Westinghouse in December and January and it may be about to happen again.

Stocks can rally off of support levels because of buyer's anxiety. Sometimes buyers can become anxious. They know that whoever wants to sell is going to go to whoever is willing to pay the highest price. They are afraid they will be outbid and they don't want to miss the trade.

So, they increase the prices they are willing to pay. Other anxious buyers see this and decide to do the same thing. This can result in a bidding war or snowball effect that pushes the price higher.

In addition, the stock is very oversold.

The red line on the chart below is two standard deviations below the 20-day moving average. Statistics and probability theory suggest that 95% of trading should be within two standard deviations of the mean. Since WAB exceeded this threshold to the downside, it will get the attention of trading algorithms and programs that are driven by statistics.

They will be anticipating a reversion to the mean or a move higher. This will draw them into the market as buyers, and they could put upward pressure on the stock.

Shares of Westinghouse are at support while being oversold. These dynamics could set the stage for a move higher.

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