Shares of Cipher Mining Inc. (NASDAQ: CIFR) continue to drop Friday. The shares remain under pressure. They have lost more than 25% of their value in just three days.
The chart of Cipher illustrates an important and amazing principle of the stock market. Because of this, we have made it our Stock of the Day.
In the stock market, certain price levels have more importance than others. These are called support and resistance levels.
At a support level, there is a large amount of buy interest or shares to be bought. Downtrends end or pause when they reach them.
Resistance levels are the opposite. At these levels, there is a large amount of sell interest or shares for sale. This is why uptrends pause or end when they reach them.
‘Markets have memories' is an old expression on Wall Street. It refers to how an important price level can retain its importance for a long time. It can be weeks, months, or even years.
Read Also: Fed’s Key Inflation Gauge Stays Hot: Are Rate Cuts At Risk?
The chart of Cipher shows an excellent example of this.
As you can see, in September 2021, the shares ran into resistance around $15.50. The high trade was at $15.39. A large selloff followed.
On Wednesday, the shares hit resistance again around $15.50. The high trade was $15.54. This is a difference of only 15 cents after four years have gone by.
This type of trading action can't be explained by using traditional fundamental analysis such as price-to-earnings or price-to-sales ratios. A buy-and-hold investor will not understand why this happens.
But a trader will.
There can be resistance at former peaks because of buyer's remorse. People who bought shares at a peak regret doing so after the price drops. Some decide to hold onto their shares, but they also vow to get out if they can eventually do so without losing money.
As a result, when the stock returns to their buy price, they place sell orders. If there are enough of them, it will form resistance like it did with Cipher.
‘Sell at former peaks' is another old Wall Street expression. As the chart shows, this would have been good advice for holders of Cipher to follow in this situation.
Read Next:
Image: Shutterstock
© 2025 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
