Shares of Synopsys, Inc. (NASDAQ:SNPS) are rebounding on Thursday. The stock was crushed on Wednesday, dropping by more than 35% after posting earnings, but there is a good chance the rebound continues.
This is why we have made Synopsys the Stock of the Day.
In the stock market, certain price levels have more importance than others. As you can see on the chart, that's the case with the $381 level for Synopsys. It has been important since it was resistance in January 2022.
When the shares rallied back to this price in August 2022, it became resistance again. This is because some of the people who purchased shares in January 2022 regretted doing so when the price dropped.
A number of these people decided to hold onto their losing positions, but they also vowed to get out if they could eventually do so at breakeven. So, when the stock returned to $381, they were selling, and this formed resistance at the level once more.
This resistance was broken in April 2023, but eventually Synopsys fell back to it, and it became a support level.
Resistance can turn into support due to regretful sellers. These are people who sold shares at resistance and later came to regret it when the price moved higher. Some decided that if they could eventually do so, they would repurchase their shares at their sale price.
When the stock fell back to around $381, they placed buy orders, and this created support at the former resistance level. Then a rally followed.
Stocks frequently rally after reaching support. This happens when some of the buyers who created the support become anxious and impatient. They know the sellers will go to the buyer who is willing to pay the highest price, so they increase the price they are willing to pay.
Other anxious buyers see this and do the same. This causes a bidding war that puts the shares into an uptrend.
Synopsys made a large move higher after finding support in April. It may be about to do so again.
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