Stock Of The Day: Will Paycom 'Fill The Gap'?

Paycom Software Inc. PAYC shares are rebounding slightly Friday. This comes following Wednesday's meltdown of more than 10%.

The stock is on the watchlist of many traders. This is why our team of technical analysts has made it our Stock of the Day.

As you can see on the chart, the selloff on Wednesday ended around the $207 level. This wasn't a coincidence. There is support at this level because it was previously a resistance level.

Support forming at former resistance levels is a common occurrence in the stock market. It is due to remorseful sellers trying to buy their shares back.

Some traders and investors who sold shares around $207 in December 2023 and April 2024 thought they made a good move when the stock trended lower soon after. But when this resistance was broken and the stock moved higher last month, many of them came to think they made a mistake.

Read Also: Government Shutdown Threat: Stocks Wobble, Holiday Travel And Paychecks Could Face Delays: What You Need To Know

If they can buy their shares back at the same price they sold them for, a number of them decided to do so. As a result, when Paycom fell back to around $207 these remorseful sellers placed buy orders.

This large concentration of orders formed support at the same price that had previously been resistance. The reason why this has the attention of some traders is the stock is now above a gap.

Gaps occur on charts when stocks close at one price and open at a different price. There is no trading between the two prices, so there is nothing to record on a chart. So, there is a blank space or gap.

If there was no trading, then there was no one who sold that regretted doing so when the price moved higher. This means that if the stock trades back through those levels moving in the opposite direction, there won't be any remorseful sellers trying to buy their shares back.

This lack of buy interest means sellers may need to be aggressive and push the price lower to gain the interest of buyers. This could result in a rapid decline in the price.

“Gaps refill” is an old saying on Wall Street. It's true — and Paycom may be about to prove it.

Read Next:
• Santa Claus Rally In 2024? Poll Shows Investors Split On End Of Year Returns, 57% Say This…

Photo: Courtesy Paycom