Lockheed Martin Corporation (NYSE:LMT) shares are trading sideways Tuesday. They have been in a steep decline since late February.
• What’s ahead for LMT stock?
The shares are oversold and at a support level. These can be bullish dynamics that may have set the stage for a reversal and move higher. This is why Lockheed Martin is the Stock of the Day.
Successful traders can recognize important price levels in the markets. These are called support and resistance levels.
Price levels that had previously been resistance can convert into support levels. As you can see on the chart, the $510 level was resistance for Lockheed in October. Now it is a support level.
Traders who sold shares at around $510 were happy when the price fell. They thought selling was the right thing to do.
But they changed their minds when the resistance broke, and the shares went higher. They came to think they had made a mistake.
Some of these unhappy traders and investors decided to buy their shares back. But they would only do so if they could get them for the same price they were sold for.
So when Lockheed Martin fell back to these levels, they placed buy orders. These orders have created support at the level.
The shares are also oversold. This means that aggressive sellers have pushed the price below its typical or average trading range. This could draw buyers into the market.
They will be anticipating a reversion to the mean or a move higher. Their buying could become a self-fulfilling prophecy that pushes the price up.
The combination of being oversold while at support can be a bullish dynamic. Oversold stocks that drop to support tend to rally. This happens when the various buyers begin to outbid each other.
This can force the stock into an uptrend, and it may be about to happen with Lockheed Martin.
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