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Jacobs Solutions Inc. (NYSE:J) is quiet on Friday. That wasn't the case on Thursday as the stock dropped almost 11% after posting earnings.
But it may have found a bottom. That's why our team of technical analysts has made it our Stock of the Day.
Support levels are prices or narrow price ranges where a large number of shares are available to buy. If a stock or market is headed lower, it's because there isn't enough demand to absorb the supply.
Sellers need to offer their shares at a discount, and this could force them into a downtrend, but the dynamic changes at a support level. There is enough demand (buy orders) to absorb all of the supply (sell orders).
This is why selloffs can end when they reach support.
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One of the main reasons why support exists in markets is because of remorseful or regretful sellers. These are people who regret selling if the prices of their shares moves higher after they do.
Some of these unhappy sellers vow to buy their shares back, assuming they can do so at the same price they were sold for. So, if the stock drops back to the sell price, they place buy orders. If there is a large quantity of these orders it will create support.
This can be seen on the chart of Jacobs.
In July, $143.50 was a resistance level. But then the resistance broke, and the stock moved higher. When it fell back to $143.50, remorseful sellers placing buy orders created support.
The same thing happened with the $152 level. It was resistance in August and support in early July.
Now Jacobs is trading close to $129.50. As you can see, this level was resistance in May. It may convert into a support level.
If it does, it could mean the selloff is over. A reversal may even follow.
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Posted In: J
