Stock of the Day: UPS Has A Good Memory

Successful traders know how to recognize which price levels in a certain market are important. These are called support and resistance levels. When a stock reaches one of them there is a good chance it reverses. Traders can profit from these reversals.

Successful traders also understand the concept of market memory. This refers to how a price level can be important for a long time. It could be weeks, months, or even years.

United Parcel Service, Inc. UPS has a good memory. That's why our technical analysis experts have made it our Stock of the Day.

As you can see on the chart, the $156.00 level was first support in September 2020. Then it was support in March 2021. It was also support once again in October 2022. Market memory kept this support intact for more than two years.

An important dynamic of technical analysis is understanding how a price level that had once been resistance can convert into a support level. This can also be seen on the chart. $176.50 was resistance for UPS in October 2020 and April 2021. Then it became a support level in October 2021.

Also Read: UPS Q2 Earnings: Revenue And EPS Miss, Annual Outlook Cut, Restarts Stock Buyback

Resistance can convert into support when remorseful sellers try to buy their shares back. Some traders and investors who sold around $176.50 were happy when the price headed lower soon after. But when the stock reversed and moved to higher prices, many of them regretted their decision to sell.

Some of these remorseful sellers decide that if they can buy their shares back at the same prices sold, they will do so. So, UPS dropped back to $176.50 in October 2021, they placed buy orders and this large concentration of orders resulted in support forming at the price that had been resistance.

A similar thing may be about to happen now.

After a weak earnings report, the shares dropped to around $124.00. This level was resistance in August 2018, November 2019 and August 2020.

If UPS has a really good market memory, it will find support around $124.00. This may be a good time to buy it.

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