Stock Of The Day: Where Is The Bottom For Airbnb?

Airbnb, Inc. (NASDAQ:ABNB) dropped by almost 8% on Wednesday after announcing a senior management change, but it may have found a bottom. That is why it is Benzinga’s Stock of the Day.

An interesting dynamic in financial markets is that certain price levels carry greater weight than others. These are called support and resistance levels. If a trader can identify them, it could lead to profitable trading.

At a support level, there is a large amount of buying interest or shares to be bought. This is why downtrends can end when they reach them.

The opposite is true at resistance levels. There are large amounts of shares to be sold. This is why uptrends can end when they reach resistance.

Another interesting dynamic of the financial markets is how a price level can shift back and forth between being support and resistance. This is evident in the Airbnb chart below.

The $130 level was supported in June and July. Subsequently, support broke, and the level became a resistance level in August and October.

Support can turn into resistance when buyers who bought at the support regret their decision after the support level breaks and the price declines. Many of these dissatisfied investors and traders choose to retain their shares.

But they also decide to sell them at break-even if they can eventually.

When the shares traded back up to $130, these regretful buyers placed sell orders. The large quantity of these orders created resistance at the former support level.

This resistance broke in December, and the level has since shifted back to a support level. This is because of seller's remorse.

Some of the people who sold shares at the resistance came to regret their decision when the price moved higher. A number of them decided that, if possible, they would repurchase their shares at the same price at which they sold them.

This is why the stock found support at this price yesterday.

Good traders can identify important price levels. It is one of the most important reasons for their success.

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