Stock Of The Day: CrowdStrike Stock Shows Technical Support Despite IT Outages
The top story on Wall Street Friday involves CrowdStrike Holdings, Inc. (NASDAQ:CRWD). Worldwide IT outages have affected banks, airlines, and even the London Stock Exchange. The problems were caused by a CrowdStrike cybersecurity platform issue and its stock is plummeting.
But despite this, the shares are still displaying classic technical analysis principles. That's why our trading team has made it the Stock of the Day.
When a stock is selling off or heading lower, there is a good chance that it finds support at a price level that had previously been a bottom. This is a common occurrence in markets.
As you can see on the chart below, CrowdStrike has found support around the same levels that it did in early May. This happens because of remorseful sellers.
Traders and investors sold their shares at the bottom. Many of them regret their decision to do so when the price eventually moved higher.
Many of these disappointed traders and investors decide to buy their shares back. But they will only do so if they can buy them at the same prices they sold them for.
So now that CrowdStrike has dropped back to this level, they are placing buy orders. This large concentration of buy orders has created support. This has put a floor under the market.
The chart also illustrates another important technical analysis dynamic.
When a stock quickly moves or gaps up through certain price levels, consolidates, and then reverses direction, it often retraces back through those levels just as swiftly.
This also has to do with sellers’ remorse, but in this case, it is because of the lack of it.
When a stock gaps up or moves rapidly higher, there is little or no trading at the levels it moves through. Because there isn't much selling, there won't be a large group of remorseful sellers trying to buy their shares back when the stock reverses and heads back through these levels.
Due to the lack of buy interest, sellers will need to be aggressive. This sets the stage for a rapid or fast move.
CRWD Price Check: Shares of CrowStrike were down 11.38% to $304.37 at the time of publication Friday.
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