When stock prices fall, buyer’s remorse dominates the market. Traders and investors buy stocks, only to suffer losses when the price falls. Naturally, they regret their buying decision.
As stocks eventually hit bottom, buyer’s remorse will slowly fade and eventually disappear. This important market movement may be about to show up on the charts of McDonald’s Corporation (MCD), which reports earnings on Monday morning. This is why McDonald’s is today’s stock.
When prices fall, some traders and investors who bought into the stock will have regrets, and some of them will decide to exit their holdings, but most will only do so if they can sell at a break-even point.
As a result, if the stock price reverses and rises to the same price at which the investor bought, the investor will place a sell order, and if there are enough such orders at or near that price, resistance will form.
As you can see from the chart, the support level for McDonald’s in February was at $284. After that, the support was broken. Next, it found support at $277 and continued to rise.
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It then encountered resistance at around $284, which was formed by buyers with sell orders who had purchased shares at the $284 level and felt regretful.
After breaking the $277 support, McDonald’s next found support at $26. It then rose to $277 but encountered resistance there. The same thing happened at $277 as it did at $284.
Following the company’s earnings report, the $263 level is now acting as resistance. Once again, a support level has turned into resistance due to buyer’s remorse.
If the stock price can break through this, it will signal an important psychological trading move. It means buyer’s remorse is fading from the market. It could signal the start of a new uptrend.
But if not, McDonald’s will likely turn around and fall again, thus continuing the downward trend that began in January.
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