The $84.50 level for Dollar Tree Inc (DLTR) shares has held significant importance for years, demonstrating a concept called ‘market memory.’ This means that certain support or resistance levels can retain their relevance for extended periods.
In September 2020, the stock found support at this level before rallying. A year later, in September 2021, it found support there again. This repeated pattern suggests that the $84.50 level has become a psychological anchor for investors.
The reason behind this phenomenon is often attributed to seller’s remorse. When a stock price drops to a support level, some investors who sold their shares at that point may regret their decision if the price subsequently rises. These remorseful sellers are likely to buy their shares back if the price drops to their original selling point, creating a new wave of buying pressure and reinforcing that level as a support.
Another factor driving price increases near support levels is the fear of missing out. When buyers see a stock price bouncing off a support level, they may become anxious, fearing that other buyers will outbid them. This anxiety leads them to increase their bids, driving the price higher. As more buyers see the increasing price, they join in, creating a snowball effect that can push the stock price significantly upwards.
Technical analysis, when applied correctly, can help investors understand the interplay of supply and demand, as well as the psychology of investors and traders. This understanding can provide valuable insights into potential price movements and help investors make more informed decisions.
