Stock Of The Day: Where Might Dick's Sporting Goods Find A Bottom?

Shares of Dick’s Sporting Goods, Inc. DKS are getting crushed due to a disappointing earnings report. The company beat estimates, but investors didn't like the guidance.  

There is a chance that the stock will continue to head lower. As you can see on the chart, there doesn't appear to be any well-defined support between current levels and $187. This is why we have made it our Stock of the Day.

Price levels that had been support before can become support again. This is a common occurrence in the stock market. It happens because of sellers' remorse.

There are traders and investors who sold their shares around the $187.00 level in late May. But right after they finished the stock took off.

When this happened a number of these remorseful sellers came to think that selling their shares was a mistake. Some of them make the decision to buy them back.

But they don't want to pay a higher price than they sold them for. So, they decide to buy their shares back if they can get them at their selling price.

As a result, when Dick’s fell back to $187 in early August these remorseful sellers placed buy orders. There were so many of these orders, that it created support at the same level that had been support before.

Read Also: Dick’s Sporting Goods Raises Outlook After Solid Q2 Results Amid Growth In Average Ticket And Transactions

If the stock reaches this level again the same dynamic could occur. Some of the people who sold in early August will try to buy their shares back. This could put a floor under the price once again.

As you can see on the chart, the stock rallied after reaching the support. This is also a common occurrence in the market. It happens because of anxious buyers.

Some of the traders and investors who created the support with their buy orders become concerned that they will be outbid by others. They know that the sellers will go to whoever is willing to pay the highest price.

They don't want to miss the trade. As a result, they increase the prices they are willing to pay. Other anxious buyers see this and do the same. It results in a bidding war that forces the price higher.

The best traders understand how important psychology is in the markets. They know that support levels can stay intact due to remorseful sellers. They also know that anxious buyers can make shares rally off of it. This understanding can lead to profits.

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