Stock Of The Day: Has McKesson Found Its Bottom And Will It Bounce Back?

The best traders traders focus on key price levels and stock momentum, understanding that oversold stocks at support often experience a rally.

After a rapid move lower, shares of McKesson Corporation MCKhave become oversold. They have also reached a price level that may provide support. This is why our team of trading experts has made it our Stock of the Day.

The red line on the chart below is called a Bollinger Band. It is two standard deviations below the 20-day moving average.

According to statistics and probability theory, 95% of trading should occur within two standard deviations of the mean or average. If this threshold is exceeded to the downside, the stock is considered to be oversold. This could draw buyers into the market.

Read Also: McKesson Rises Yet Lags Behind Market: Some Facts Worth Knowing

They will be expecting a reversion to the mean or a move higher. Their buying could push the price upwards. As you can see on the chart, over the past year, every time McKesson fell below the Bollinger Band, a move higher followed.

The stock is also trading at a price level that may act as support. The $472 level was resistance at the end of last year. Price levels that were previously resistance tend to turn into support.

This is a common occurrence in the financial markets. It happens because of remorseful sellers.

Some traders and investors sold while the shares were at resistance and regretted doing so when the price moved higher. A number of these disappointed sellers decided to buy their shares back.

But they will only do so if they can buy them at the same price they were sold. As a result, when the stock eventually returns to their selling price, they place buy orders. If there are enough of these buy orders, it will create support at the price that had previously been resistance.

Stocks that are oversold and at support tend to rally. There's a good chance that this will be the case with McKesson.

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Image created using artificial intelligence via Midjourney.