Which Way Will Wayfair Go?

Shares of Wayfair Inc. W consolidated on Tuesday after the stock soared by more than 12.5% on Monday, following a strong earnings report. The company reported 11 cents for Q2 versus the prior year's loss of 34 cents.

But now Wayfair is at a resistance level. The odds are that it doesn't stay at this level for too long. It will either reverse or break the resistance and move higher. Either way, savvy traders will be able to profit. This is why it is our Stock of the Day.

Stocks tend to hit resistance at levels that have previously been resistance or a peak. Sometimes, after hitting this resistance, they reverse and go lower. This is what the old Wall Street expression ‘sell at former peaks' refers to.

As you can see on the chart, Wayfair hit resistance in July 2024 around the $56.80 level. After selling off, it returned to this resistance in October and December 2024, and the same thing happened.

There can be resistance at prices that had previously been resistance points due to remorseful buyers. They buy at the peak, only to regret doing so when the price drops.

Some of them decide to sell their stocks if they return to the buy price so they can get out of their positions without losing money. So, when the stock returns to the level, they place sell orders and if there are enough of them, it creates resistance at the price again.

You can also see on the chart that a similar dynamic is occurring now that Wayfair has rallied back to the $73.75 level. It was resistance in September 2023 and May 2024. People who purchased the stock at those times are now trying to finally get out at breakeven.

Good traders can identify important price levels. They know that if a stock reaches a level that had previously been a peak or resistance, there is a good chance it will hit resistance again. They also know that this can be a logical place to sell, and this may be the case now with Wayfair.

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