Stock Of The Day: Why The Viatris Meltdown Ended Where It Did

Shares of Viatris Inc. NASDAQ are consolidating Friday. This follows yesterday's 15% selloff. The stock was down because the company reported earnings that were below what The Street was looking for.

The chart of Viatris is a good illustration of an important market dynamic. Certain price levels have more importance than others. This is why our team of technical analysts has made it our Stock of the Day.

Some stock market analysts are proponents of Random Walk Theory. They believe that changes in stock prices are random. Past prices can't be used to determine future prices or trends.

These analysts are wrong. If price movements were random, support and resistance levels would not exist. Every price level would have the same amount of nonimportance.

But clearly, support and resistance levels do exist. A look at almost any chart shows it.

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As you can see, this is true with Viatris. The $13.50 level has been resistance and the $8.75 level has been support. These levels have had very precise price action around them.

When the stock tested this resistance in February of last year the high trade occurred at $13.48. A selloff followed but the stock reversed and made it back to the resistance in November 2023. This time the high trade took place at $13.55.

The action around the support has been very precise as well.

When shares found support, the low trade occurred at $8.74. Yesterday's selling ended when the price got close to this support and the stock reversed. The low trade was at $8.77.

The reason why there is support around this level is because of ‘seller's remorse'.

Some of the people who sold in November 2023 decided they made a mistake selling because the stock rallied soon after. Some of them decided that, if possible, they would purchase their shares back if they can do so at their selling price.

As a result, when Viatris got close to this level yesterday, they placed buy orders. The large concentration of these orders formed support and that put a floor under the price.

Good traders know that the markets are not random. They also know certain levels are in fact more important than others. The chart of Viatris, seen below, is a clear illustration of this market dynamic.

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