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Advanced Micro Devices, Inc. (NASDAQ:AMD) is moving higher. This comes after the company's analyst day. Some companies host events where Wall Street investors and analysts can see presentations to learn more about them.
AMD is our Stock of the Day. It is trading just below resistance, and this could limit its short-term upside potential.
‘Sell at former tops' is an old trading adage. It isn't just an old wives' tale. It is based on logic.
When a stock gets to a new high and then heads lower, some of the people who purchased shares around the high decide their decision to buy was a mistake. Some of them choose to hold onto their losing positions.
But they also decide to exit these positions if they can eventually do so without losing any money. So if the price rallies back to its former peak, they place sell orders.
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If there are enough of these orders, they will create resistance at the same level again.
Sometimes, when a stock reaches a resistance level, it reverses and trends lower. This happens because of anxious sellers.
These are people who become concerned that other sellers will undercut them. Buyers will go to whoever will sell to them at the lowest price, and these concerned sellers don't want to miss the trade.
As a result, they reduce their offering prices. Other concerned sellers see this and do the same thing. This can turn into a snowball effect that forces the price lower.
This is what the expression ‘sell at former peaks' refers to.
A stock can hit resistance at a former peak if there are enough remorseful sellers at that level. A stock can sell off resistance if anxious sellers start to undercut each other.
It's not clear whether AMD will reverse, but some traders anticipate it will.
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Posted In: AMD
