Stock Of The Day: Is The Axon Rally Over?

Shares of Axon Enterprise, Inc. (NASDAQ: AXON ), our Stock of the Day, are consolidating on Wednesday.

They have been in a strong uptrend.

But the rally may end or pause around the $637 level.

As you can see on the chart below, this is a resistance level. “Sell at former tops” remains an old Wall Street adage.

It’s evident on the Axon chart. $637 was a top or resistance in January.

When the shares trended lower after this, a number of the investors and traders who bought at the top regretted doing so.

Some of them decided to hold onto their losing positions.

But they also decided that if they could eventually do so, they would exit or sell at breakeven.

Because of this, when the shares rallied back to $637 in early July, they placed sell orders.

There were enough of these orders to create resistance at the level again.

A similar dynamic is occurring now.

People who bought shares in early July are selling at their buying price.

These orders have created resistance at the level again.

Sometimes, stocks sell off after reaching resistance.

This was the case the last two times Axon reached $637, and it could happen again.

Stocks sell off resistance when some of the traders and investors whose sell orders created the resistance become anxious and impatient.

They worry that other sellers are willing to sell their shares at a discount.

They know this is where the buyers will go.

As a result, they reduce their offer prices.

Other anxious and impatient sellers see this and do the same thing.

This can result in a snowball effect that forces the shares into a downtrend.

Read Also: Stock Market Today: S&P 500, Nasdaq 100 Futures Rise Ahead of July CPI Print—CoreWeave, Nebius, Super Micro, Lumentum in Focus Image: Shutterstock