Rivian Automotive, Inc. (NASDAQ:RIVN) is trading lower Wednesday. The shares dropped almost 20% yesterday after the company announced a share offering.
Investors are concerned that this offering will dilute the value of their shares. If they continue to trend lower, the selloff may end around the $12.90 level. This is why Rivian is the Stock of the Day.
As you can see on the chart below, this level was support in October. It was also support in May. If the selloff reaches this level, there is a good chance that it finds support once again.
In the stock market, levels that had previously been support can become support again. This is a common occurrence, and it is because of regretful or remorseful sellers.
Some of the people who sold their shares around $12.90 in October decided that selling was a mistake when the stock rallied. A number of these people wanted to buy their shares back if they could eventually get them for the same price they were sold for.
When Rivian fell back to this important level in May, these remorseful sellers placed buy orders. There were so many of these orders that it formed support at the level again.
After the shares moved higher, a similar dynamic occurred. Many of the people who sold in May now regret doing so because the price is higher. A number of them decided to buy back their shares at the selling price.
If the Rivian sell-off reaches this former support level, they will place buy orders. If there are many of these orders, it could result in support forming at the level again.
Successful traders understand that emotions and sellers’ remorse can create support in the markets. This gives them insight into where a downtrend may end and a new uptrend may form.
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