Trading in Coinbase Global, Inc. (NASDAQ:COIN) is quiet on Tuesday. The shares are getting close to the $182 level.
Coinbase is the Stock of the Day. It is in a trading range, and these dynamics offer profit opportunities.
• Coinbase Global shares are experiencing downward pressure. What’s driving COIN stock lower?
Some traders like to buy at the bottom of the range and sell near the top of the range. Trading ranges have support at the lower end and resistance at the top.
Support is a level where there is a large amount of demand, or buy orders, for a stock. This is why stocks stop going lower when they reach support.
Stocks tend to rally after they reach support. This happens when some of the buyers who created the support become anxious and impatient.
They think someone else may be willing to pay a higher price. They don't want to miss the trade, so they increase their bid prices.
Other anxious buyers see this and do the same thing. It can result in a snowball effect that pushes the price higher.
Resistance is a price level where there is a large amount of supply, or shares for sale. Rallies end or stall when they reach resistance. This is a logical place to have a sell order.
Instead of buying off the bottom, some traders prefer to wait for the resistance at the top end of the range to break. They like to buy breakouts.
If resistance “breaks,” meaning that the stock gets and stays above the resistance, it can be a bullish dynamic. It may mean the investors and traders who created the resistance are gone.
They have either finished or canceled their orders.
With this large amount of supply taken out of the market, the stage could be set for a rally. Investors and traders who wish to purchase shares may be forced to outbid each other. This can force the price higher.
Some traders like to buy shares at the bottom of a range. Others prefer to wait for a breakout. Both can be profitable opportunities.
Photo: David Esser via Shutterstock
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