Ulta Beauty, Inc’s (NASDAQ:ULTA) shares dropped more than 14% on Friday after the company posted disappointing earnings. Today, they’re trading sideways.

If the selloff reaches levels around $496, it may end or at least pause. As you can see on the chart below, this price has been support before, and price levels that have previously been support can become so again. This is while Ulta Beauty is our Stock of the Day.

Support can stay intact due to investment psychology.

Many of the traders and investors who sold shares in late August and early September decided that their decision was a mistake when the price rallied. Some of them also decided that, if they could eventually do so, they would buy back their shares.

But they also decided that they would only buy them if they could get them for the same price they were sold for.

As a result, when Ulta dropped back to around $496 in November, they placed buy orders. There were so many of these orders that it created support at the level again.

Now the same dynamic may play out once more.

Some of the people who sold at the support in November have regretted doing so ever since. Many are watching and waiting to see of Ulta will reach the important $496 level once again.

If it does, remorseful sellers may come into the market as buyers. If they place enough buy orders, it could result in support at the level again. The stock may even rally.

Stocks rally off support when some of the traders and investors who created the support become anxious and impatient. They know the sellers will go to whoever is willing to pay the highest price.

As a result, they increase their bid prices. Other impatient buyers see this and do the same. It could result is a rally that pushes Ulta up off this important level once again.

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