MongoDB, Inc. (NASDAQ:MDB) is trading lower on Tuesday. Yesterday, the shares fell by more than 18%. The move was triggered by the announcement that the CEO is leaving the company.
A powerful reversal took place. This is why MongoDB is the Stock of the Day.
• What’s going on with MDB shares now?
Successful traders understand how important trader psychology is when they analyze the markets. The emotions of traders and investors can have a significant impact on how a stock trades.
As you can see on the chart, yesterday’s low was at exactly $300.
There is no way finding support at this price can be explained or understood by using traditional financial metrics such as the PE or PB ratios.
This price action is the result of psychology. People like to place their orders at round levels.
There is another reason why there is support around the $300 level. It is also the result of psychology.
People who sold shares while the stock was at $300 in late May regretted their decision to sell when the price rallied. They experienced seller’s remorse.
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Some vowed that if possible, they would repurchase the shares at the same price they sold for. When MongoDB dropped back to this level in late June, they placed buy orders.
These orders created support.
Then a similar dynamic took place. After the shares rallied, a number of people who sold at the bottom regretted it. When the stock fell back to $300 in late July, some of these regretful sellers entered the market as buyers, and their buying formed support.
Many newer traders think that stocks move because of fundamentals. This may be the case sometimes.
But many times, moves result from the psychology and emotions of the people doing the trading. MongoDB’s chart is a good illustration of this.
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