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Trading in Mastercard Incorporated (NYSE:MA) is quiet on Wednesday as the market waits for the NVIDIA Corporation (NASDAQ:NVDA) earnings. But Mastercard may be poised to rally.
It is oversold and at support, which could be bullish dynamics. It is why Mastercard is the Stock of the Day.
Many trading strategies and methods are based on the concept of reversion to the mean. If something goes too far or builds excessive momentum in one direction, there is a good chance it will reverse.
Most of the time, a stock stays within its typical trading range. If sellers become emotional and aggressive, they can push the shares below this range.
When this happens, traders say the stock is oversold. Some will enter the market as buyers because they will be anticipating a reversion to the mean or a move higher.
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One tool used by traders to determine if a stock is oversold is the Relative Strength Index (RSI). This is on the lower part of the chart.
If the blue line gets below the red horizontal line, it indicates oversold conditions. As you can see. That's the case now. This could draw buyers into the market, and they may push the price higher.
Mastercard is also at a support level.
Support is a price or a narrow price range where there is a large amount of buying interest. This is why selloffs pause or end when they reach support.
There was support for Mastercard in June, and now it may be support again.
Sometimes stocks rally off support. This happens when some of the buyers who created the support become impatient and start to increase the prices they are willing to pay.
This can result in a chain reaction that pushes the price higher as other impatient buyers do the same. This combination of being oversold at a support level suggests a good chance Mastercard rallies.
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