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

CVS Health Corporation (NYSE:CVS) is flat on Wednesday. The shares dropped by almost 15% yesterday after it was reported that Medicare was proposing rates that are well below expectations.

• What’s driving CVS shares today?

If the shares continue to trend lower, they may find support around $70. They may even rally off this level. This is why CVS is the Stock of the Day.

Successful traders understand which price levels in a market are important. These are called support and resistance levels.

If a stock is trending higher, it's because there aren't enough shares for sale to fill all the buy orders. Buyers are forced to outbid each other and this pushes the price higher.

When a stock reaches a resistance level, there are enough shares for sale to fill all of the buy orders. Rallies end or pause when they reach resistance.

The opposite is true at support levels.

If a stock is trending lower, there aren't enough buy orders to absorb all of the sell orders. Sellers are forced to undercut each other and this pushes the price lower.

Sell-offs end or pause when they reach support. There are enough buy orders to fill all of the sell orders.

An amazing dynamic in financial markets is how a level that had been resistance can convert into a support level. Another is how a level that had previously been support can become so again.

Both occur because of sellers' remorse.

Some of the people who sold around $70 regretted doing so when this resistance broke. Many of them decided to buy their shares back at around $70 if possible.

When the stock fell back to $70 in September, they placed buy orders. This formed support.

After the stock rallied, some of the people who sold regretted doing so. A number vowed to buy the shares back at around $70 if possible.

Remorseful sellers may create support again. CVS could find a bottom here.