Intel Corporation (NASDAQ:INTC) shares are trading lower on Wednesday after running into resistance around the $100 level on Tuesday. This is why the tech giant is Benzinga’s Stock of the Day.

Psychology is very important in the financial markets. It can move prices and create important levels.

Some analysts say earnings and future prospects determine stock prices. These fundamental metrics are important in the long run. In the short run, psychology and emotions move prices.

An example of this can be seen on Intel’s chart (see below). The shares ran into resistance around the $100 level yesterday.

There is no way fundamental metrics can justify why the $100 level is important. But it is easy to understand if investor psychology is considered.

People like to place orders at round price levels. These are called psychological levels.

Intel Downtrend

In early June, there were more Intel shares for sale than there were to be bought. Those who wished to sell needed to offer their shares at a discount to attract sellers, and this pushed the price lower.

When the shares reached the $100 level, the buyers flooded the market. Sellers could sell as many shares as they wished to without pushing the price down.

A rally followed and those who bought shares around $100 were glad they did.

But when this support broke in early July, some of them came to think buying was actually a mistake. They decided to sell if they could eventually exit their positions at breakeven.

This is why there is resistance around the $100 level. There is a large group of sell orders at this price.

Important price levels are like forks in the road. When a stock reaches one, they tend to break out, or reverse.

Successful traders don’t guess which way a stock will go after it reaches one of these levels.

They wait for the new trend to form before they take a position. This increases their chances of success.

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