Salesforce, Inc. (NYSE:CRM) shares are moving higher Friday. They rallied more than 22% after reporting earnings.
The shares may be closing in on a possible resistance level. This is why Salesforce is the Stock of the Day.
• What are CRM shares doing today?
As you can see on the chart, Salesforce hit resistance in December and January at around $265. It sold off and headed lower after.
When this happened, many of the investors and traders who bought shares came to think their decision was a mistake. A number of them decided to hold onto their losing positions.
Some also decided that if they could eventually do so, they would sell their shares at the same price they paid for them. This way they can exit the position without losing any money.
This means that if the stock reaches $265, they will be placing sell orders. If there is a large enough quantity of these orders, it will create resistance at the level again.
Sometimes shares sell off after reaching resistance. This is what happened with Salesforce in January.
Stocks sell off resistance when some of the investors and traders who created the resistance with their sell orders become anxious and impatient. They are concerned someone else will be willing to sell their shares at a lower price.
They know this is where the buyers will go. They don’t want to miss the trade, so they reduce their offering prices. Other anxious sellers see this and do the same thing.
This can result in a snowball effect that forces the shares lower.
Many newer traders think that moves in the stock market are the result of some type of fundamental news. Sometimes this is the case.
But most market moves are the result of emotions and psychology. This can be seen on the chart of Salesforce.
Buyer’s remorse can form resistance. Anxious and impatient sellers can drive markets lower. If a new trader understands how important market psychology is, it will lead to success.
Photo: Shutterstock
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