ServiceNow, Inc. (NYSE:NOW) shares are moving higher Friday. This follows yesterday's selloff of almost 18%. The move came after the company reported its earnings. It looks like a new trading range has formed. This is why we have made ServiceNow the Stock of the Day.

Some people think that stock prices move because of things like earnings and sales. Sometimes that's the case.

But it is also important to understand that psychology plays a significant role in trading. This can be seen on almost any chart, and ServiceNow is no exception.

As you can see, the $100 level was support. There is no way a fundamental or buy-and-hold analyst could ever explain why such a precise round number can be important. It can't be explained by things like earnings and interest rates.

But it can be explained by psychology.

ServiceNow Technical Analysis

People like to place orders at nice, round levels. It is an emotional response.

In January, the shares were in a steep downtrend. Many investors and traders told themselves that if the shares reached $100, they would buy. So many people did this that it created support at that level.

This support broke in early April.

When that occurred, many traders and investors told themselves that if the shares reached $85, they would buy. The same thing happened. There was support at the level.

Then ServiceNow rallied back to the $100 level. Many of the people who bought shares at $85 had decided they would sell if the price reached $100. When it happened, they did.

The large concentration of these sell orders created resistance around $100.

When there is support at a precise round number, traders call it a ‘psychological' level.

The best traders understand that certain market moves may not seem to make sense from a fundamental or valuation perspective. They know moves can also be due to psychology and emotions.

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