Shares of Twilio Inc. (NYSE:TWLO) surged Friday after the company reported earnings that handily beat estimates. However, the stock is now approaching a key technical level that could act as resistance, potentially slowing or pausing the rally—making it the Stock of the Day.
In markets, certain price zones carry added weight. As shown on the chart, the $175 level previously served as support in January 2022 and later as resistance in April 2022.
Twilio is now testing that same level again, putting renewed focus on whether it can break through or stall once more.
Price levels that had been support can turn into resistance levels. It is a common occurrence in the markets. This is a result of psychology. It is due to buyers' remorse.
The traders and investors who bought shares around $175 in January 2022 were glad they did when they rallied after. But when this support broke, and the shares went lower, they decided they had made a mistake.
They also decided to sell if the shares rally back to their buy prices so they can exit at breakeven. So, when the shares returned to around $175, they placed sell orders. These orders created resistance at the level.
After this happened, the price went lower. Some of the people who bought shares around that level regretted it when the price dropped after. These investors and traders decided to hold on to their losing positions.
They also decided to exit at breakeven if they could eventually do so.
Now that the shares have returned to this level, these remorseful buyers are now selling. This has created resistance at the level again.
Successful traders understand how important psychology is in the markets. They know that remorseful buyers can create resistance at former support and former resistance levels. This understanding allows them to enter and exit positions profitably.
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