“Markets have memories” is an old Wall Street expression — and it's true. It means an important price level can retain its importance for a long time.

As you can see on the chart, this is the case with the $162.00 level for PepsiCo Inc PEP. It had support in March and June. Now the shares are testing this level again.

Sometimes stocks rally after they fall to a support level. It happened with PepsiCo these last two times and it may be about to happen once more. That's why our team of trading experts has identified it as our Stock of the Day.

Support

A support level is a large group of traders and investors looking to buy shares at, or close to, the same price. In this case, it's $162.00.

At support, there is more demand, or buy orders, than supply or sell orders. This is why sell-offs tend to end when they reach support.

Sometimes some of these potential buyers become concerned they won't be able to buy any shares. They know the sellers will go to whoever is willing to pay the highest price and they don't want to miss the trade.

As a result, some of these concerned buyers increase their bids or prices they are willing to pay. Other worried buyers see this and decide to do the same thing. This bidding war can result in a snowball effect that may push the price higher and force the shares into a new uptrend.

Poised to Rally?

This is what happened with PepsiCo in March. It also happened in June. And there's a good chance that it is about to happen once again.

Markets have memories. Sometimes an important support or resistance level can retain its importance for weeks, months, or even years. Successful traders understand this and they use it to profit.

They know that when stocks drop to levels that had been support before, there's a good chance they will find support again. There's also a good chance they reverse and rally.

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