Danaher Corporation (NYSE:DHR) is consolidating on Wednesday. The shares plunged by more than 10% yesterday, with the move driven by a weak earnings report.
But the shares may rebound from here. This is why Danaher is the Stock of the Day.
• Where are DHR shares at now?
Over 28 million shares traded yesterday. This is well in excess of the average daily volume of 4.96 million.
Sometimes, when a huge amount of volume trades after a downtrend, it can be a bullish dynamic. It can show a capitulation on the part of the sellers.
Investors and traders who wish to sell become increasingly frustrated as the shares continue to trend lower. They try to remain patient and wait for the price to rebound so they can sell at a higher level.
But this rebound never occurs. The shares continue to trend lower.
Finally, these sellers capitulate. They decide to throw in the towel and sell regardless of the price. As a result, a large amount of volume could trade, as happened with Danaher yesterday.
This can end up being a bullish dynamic. After the dust settles, there may be people who believe the move lower was warranted. But they also believe that the market overreacted.
They decide to buy.
They enter the market as buyers, but they have a hard time finding sellers. The sellers are done and are gone.
To draw the sellers back into the market, buyers have no choice but to pay premiums and outbid each other. This can force the shares into an uptrend.
The price action yesterday was also bullish.
As you can see on the chart, Danaher opened near the lows of the day. But the buyers took over and drove the price higher. The shares then closed near the highs of the day.
This combination of a possible capitulation by the sellers and positive price action could be bullish dynamics. Danaher may be about to enter an uptrend.
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