Archer Aviation Inc. (NYSE:ACHR) consolidated on Tuesday. The shares gained almost 20% yesterday after the company announced a partnership with defense firm Anduril.
But the move higher may soon end. The shares are getting close to a resistance level. This is why Archer is the Stock of the Day.
• Archer Aviation stock is trading near recent lows. Where is ACHR stock headed?
As you can see on the chart, the $5.50 level was support for Archer. Now it has become a resistance level.
Support is a price level where there is a large amount of demand for a stock. In other words, there are a lot of buy orders. This is why selloffs end when they reach support.
Sometimes stocks rally after they reach support. This happens when some of the buyers who created the support become anxious and impatient.
They increase bid prices. Other anxious and impatient buyers see this and do the same thing, and this results in a rally.
But sometimes when stocks reach support levels, sellers eventually overpower buyers and push the price below support. When this happens, traders say support has been broken.
If support breaks, some of the people who purchased shares at the support level come to regret doing so. They decide to hold on to losing positions, but also decide that if they can eventually do so, they will sell out at breakeven.
As a result, when the shares rally back up to what had been a support level, these unhappy buyers place sell orders. If there is a large quantity of these orders, it can create resistance at the same price that had been support.
As you can see on the chart, the $5.50 level was support for Archer. Now it is a resistance level.
Traders who can identify important price levels will profit.
Photo: Courtesy Archer Aviation
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