The time-honored Wall Street adage “gaps refill” holds true – when a stock swiftly traverses certain price levels, it tends to reverse and return to those levels with equal agility in the opposite direction.
The Tale of Amazon’s Potential Gap Refill
Amazon.com Inc. (NASDAQ: AMZN) might be on the brink of filling a gap – a move signaling an upward trajectory. Hence, it rightfully earns the status of our Stock of the Day.
During a market upswing, the scarcity of sell orders leads buyers to pay increasingly higher prices to enter the market, enticing reluctant sellers to participate.
The Dynamics at Resistance Levels
However, upon reaching a resistance level, where numerous traders and investors aim to sell around the same price, market dynamics shift.
Resistance signifies an abundance of sell orders outweighing buy orders, causing market rallies to stall or cease upon reaching this critical threshold.
Buyer’s remorse often underpins resistance formation as individuals regret purchasing at higher prices and seek to exit without losses, establishing formidable resistance zones that impede subsequent price advances.
When a stock closes at one price and reopens notably lower the next day, a visible gap emerges on the chart – such as Amazon experienced between Aug. 1 and Aug. 2, with shares closing at $187.04 and reopening at $166.75.
The Potential for Rapid Upswing
Now, as Amazon oscillates between these price points, a swift upward momentum could ensue, compelling buyers to proactively drive prices higher to secure shares, potentially leading to the repletion of the price gap.
The reclamation of these price levels signifies an impending move, with buyers poised to act assertively in propelling Amazon’s stock valuation upwards.
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