Palo Alto Networks, Inc. (NASDAQ:PANW) stock is higher during premarket trading on Thursday. The shares dropped by more than 9% on Wednesday after the company reported earnings.

The shares may find support if they reach the $315 level. This is why we have made Palo Alto the Stock of the Day.

As you can see on the chart, $315 was support for Palo Alto in early July. When the shares rallied after, many of the people who sold around $315 decided that doing so was a mistake.

Some of these disappointed sellers also decided that if and when they could eventually do so, they would repurchase their shares at their selling price. When Palo Alto dropped back to $315 in late July, they placed buy orders.

There were so many of these buy orders that they formed support at the same level that had previously been support.

Then a similar dynamic occurred. The shares rallied, and many of the people who sold at the support in late July decided that selling was a mistake. They also decided to buy back their shares if they could eventually get them at the same price they were sold for.

This means that if Palo Alto drops back to $315, they will place buy orders. If there is a large enough quantity of these orders, it will form support at the level again.

The best traders understand how important psychology is in the market. Seller’s remorse can create support at certain price levels.

The support doesn’t form exclusively because of earnings, sales, or any other fundamental metrics. Most moves that take place in the markets are due to psychology and short-term supply and demand dynamics.

Successful traders are not mathematicians. They are more like psychologists. They can profit because they understand how to read and interpret the psychology of the markets.

PANW Stock Price Activity: Palo Alto Networks shares were up 1.68% at $334.00 during premarket trading on Thursday, according to Benzinga Pro data.

See More: Top Growth Stocks

Photo: PJ McDonnell via Shutterstock