The best traders don't play offense. They play defense. When they trade, they are reactionary.
They let the market tell them what to do. These traders know that the market has a “memory.” This means that important support and resistance levels can stay intact for long periods of time.
It could be weeks, months — or even years. As you can see on the chart, this could be the case with the $225 level for Humana Inc. HUM .
This is why our team of technical analysis experts has made it our Stock of the Day. If a stock is trending lower, there isn't enough demand to absorb all of the supply. Sellers are forced to offer their shares out at a discount if they want to find someone to buy them.
This action forces the shares into a downtrend. Downtrends end when they reach support. At support levels, there is enough demand (buy orders) to absorb all of the supply (sell orders).
Read Also: Oil Prices Spike, Energy Stocks Jump After Iran’s Missile Attack On Israel: What Investors Need To Know The $225 level first became support for Humana in April 2019. Then it was support again in March 2020. This was a case of “market memory.
” Support can stay intact for extended periods of time because of remorseful or regretful sellers. These are people who sold their shares while they were at support, but regretted doing so after the stock rallied and the price moved higher. Some of these disappointed sellers vow to buy their shares back.
But they will only do so if they can get them at t.
