Stock Of The Day: Micron Technology – The Best Traders Don't Guess

Trading can be complicated and confusing for new traders. They have difficulty deciding where to place their buy and sell orders. Sometimes they just guess. This is a good way to lose money.

Experienced traders let the market tell them what to do. They know that when a stock reaches a price level that had previously been resistance or support, it can become so again and there is a good chance the trend changes. This can be seen on the chart of Micron Technology, Inc. MU. This is why it is our Stock of the Day.

As you can see, when Micron reached the $113.20 level it hit resistance and reversed. This wasn't a coincidence. In the stock market, there tends to be resistance at price levels that had been resistance previously.

There are traders and investors who bought shares around $113.20 in September and October that came to regret doing so when the price dropped soon after. A number of them decided they made a mistake and vowed to sell if they can without losing money.

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As a result, when the price eventually returned to levels around $113.20, they placed sell orders.

This would allow them to exit their positions at breakeven. This large concentration of these sell orders created resistance at the same price that had been resistance before.

You can also see on the chart how the $99.55 level was support for Micron at the end of October. This isn't a coincidence, either. There tends to be support at levels that had been so before.

This happens because some of the traders and investors who sold shares around $99.55 at the beginning of October thought they made a mistake when the price moved higher soon after.

Some of them decided to buy their shares back if they can get them for the same price they were sold at. So, when the stock dropped back to levels around $99.55, they placed buy orders. This large concentration of buy orders created support at the same price that had been support before.

Guessing is a great way to lose money. Savvy traders let the market tell them what to do. They know that when a stock reaches levels that had been resistance or support previously, there is a good chance the trend reverses.

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