Salesforce, Inc. (NYSE:CRM) shares slammed into a wall of resistance on Monday, making the CRM software provider our Stock of the Day. Stocks tend to selloff after they reach resistance, and that could happen here.
Stocks move higher when demand exceeds supply. More shares need to be bought than need to be sold. Those who wish to buy have no choice but to outbid one another and pay premiums to acquire shares.
This forces the shares into an uptrend.
Resistance is a price or level at which a large number of shares are for sale. Traders and investors can buy all they wish without pushing the price any higher. Rallies tend to pause or end when they reach resistance.
Salesforce Technical Analysis
Resistance at $210 is not a coincidence. It was support in May 2024, and levels that were previously support can turn into resistance levels. It is a common occurrence in the financial markets. It's due to buyers' remorse.
People who purchased shares around the $210 level were glad when they rallied. But when this support broke in January, those who still held the shares came to regret buying.
A number of them decided to hang on to their losing positions. They also decided to exit the position at breakeven if they could eventually do so. When Salesforce rallied back to $210 yesterday, they placed sell orders.
There were so many of these orders that it created resistance at a price that had previously been support.
Sometimes stocks reverse and head lower after they reach resistance. This is because some of the sellers who created the resistance become anxious and impatient. They are concerned that other sellers will undercut them.
So, they reduce their offering price. A snowball effect occurs when other impatient sellers see this and do the same thing. This action creates a downtrend, and it may happen with Salesforce.
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