Airbnb, Inc. ABNB shares are staging a small rebound Monday. This comes following Friday's sell-off of almost 5%.
There is a good chance the shares will reverse and rapidly move higher. This is why our team of trading experts has made it our Stock of the Day.
As you can see on the chart, the stock found support around $130. This wasn't a coincidence. This level was support in November and in the financial markets there tends to be support at levels that had been support before.
The reason why is simple. It is because of “seller's remorse.” Some of the traders and investors who sold at the support thought they made a mistake when the stock ripped higher soon after.
A number of these remorseful sellers decided to buy their shares back at the same price they sold them for. As a result, when the stock fell back to the sell price they placed buy orders. The large concentration of these orders created support and put a floor underneath the price.
Some of these buyers may push the price higher. Sometimes buyers get concerned that they will be outbid by others. They know sellers will go to whoever is willing to pay the highest price.
So, they increase the prices they are willing to pay. Other concerned buyers see this and do the same thing. This can force the shares into an uptrend.
These buyers may have a hard time finding someone to buy shares from. They may need to be aggressive and this could result in a rapid move higher.
One of the main reasons why there is resistance in markets is because of “buyer's remorse.” People buy and if the price drops after, many decide to get out at breakeven if possible. So, if the stock returns to its buy price, investors place sell orders.
When a stock makes a rapid move lower like Airbnb did Friday, it moves through the price levels quickly. There probably wasn't enough time for a large concentration of buyers to form who would be trying to sell if the price moved back through these levels in the opposite direction.
Because of this, buyers might be forced to bid premiums to draw sellers into the market. This could result in the stock making a rapid move higher.
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