Shares of Archer Aviation Inc. (NYSE:ACHR) are flat on Thursday. But they have been in a downtrend that may continue.
Once significant support breaks, it can create a bearish dynamic. It is why Archer is our Stock of the Day.
As you can see on the chart below, the $9.15 level has been important for Archer. It was resistance in March and April. Then it became support in June and August.
Price levels that have been resistance converting into support is a common occurrence in the financial markets. It happens because of investor and trader psychology.
Some of the people who sold their shares around $9.15 decided they made a mistake when the resistance was broken in May and the price moved higher.
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A number of them vowed to repurchase their shares if they could eventually get them for the same price they were sold at. When the stock dropped back to around $9.15 in June and August, these remorseful sellers placed buy orders.
The large number of these buy orders created support at the level.
Broken support means that the investors and traders who created the support with their buy orders have left the market. They have either finished or canceled their orders.
With this demand, or buyers taken out of the market, the stage is set for a move lower. Sellers will likely offer their shares at a discount to draw buyers into the market, which could force the shares into a downtrend.
If Archer continues to drop, there is a good chance it finds support around $5.50. As you can see, this level was support in April, and there tends to be support at levels that have previously been support.
This is also due to seller's remorse.
Some of the people who sold at $5.50 regretted doing so when the shares took off soon after. A number decided to buy them back if they could eventually do so at their selling price.
This means if the stock reaches $5.50, they will place buy orders, and if there are enough of them, the level will become support again.
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