Stock Of The Day: When Will Nucor's Selloff Hit Bottom?

Shares of Nucor Corporation NUE are falling on Friday. This follows Thursday’s drop of more than 5%.

There is a good chance the selloff ends around current levels. There is also a chance that the stock reverses and rallies, so Benzinga’s team of technical analysts has made it our “Stock of the Day.”

The move lower was the result of a downgrade by UBS from Buy to Neutral.  UBS also downgraded other steel companies as well. It cut Commercial Metals Company CMC from Buy to Sell and Steel Dynamics, Inc. STLD from Buy to Neutral.

UBS downgraded the entire steel industry. It said that the risk-reward profile has become "less compelling" and "more balanced.

There is a chance that the sell-off will soon end.

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As you can see on the chart, the stock found support around $130. This level was support in January and May 2023.

An important technical analysis dynamic that successful traders understand is that there tends to be support at price levels that had been support before.

This is because of psychology. There are traders and investors who sold shares while they were at support. Some of them decided they made a mistake when the price ripped higher soon after. A number of these remorseful sellers vowed to buy their shares back if they could get them at the same price they were sold for.

So, now that the stock has returned to around $130, they are placing buy orders. The large concentration of these orders has created support at the same price that had been support before.

Sometimes stocks rally after they reach support. This is also due to psychology.

Some of the investors and traders who want to buy get nervous. They don't want to miss out, and they are afraid someone else will be willing to pay a higher price than they do. They know that's who the sellers will go to.

As a result, they raise the prices they are willing to pay. Other nervous buyers see this and do the same thing. It results in a snowball effect that can push the price higher.

Successful traders understand how psychology can affect price action. Seller's remorse can keep support intact. Nervous buyers can make stocks rally.

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