Stock Of The Day: Is The Novo Nordisk Death Spiral Finally Over?
Novo Nordisk A/S (NYSE:NVO) is trading higher on Friday. It is just below resistance around the $58 level.
Novo has been in a major downtrend since June 2024. Since then, it has lost about 60% of its value. But there is a chance that a reversal may be taking place. This is why it is our Stock of the Day.
Sometimes traders and investors forget the basic principles of financial markets and overcomplicate things. One of these principles is that prices are determined by supply and demand.
If a stock is in a downtrend, it's because there are more shares available for sale than there are buyers. Sellers undercut each other's prices to attract buyers, which in turn pushes the stock lower.
At support levels, there is a large amount of buy interest. There are as many, or even more shares to be bought than there are for sale. This is why a selloff will end or pause when it reaches support.
Read Also: Trump Wants To End Quarterly Reporting Requirements—Not Everyone Agrees
As you can see on the chart below, this is what happened with Novo Nordisk in April around the $58 level.
After finding support, the stock rallied. People who bought shares at the support were happy they did so.
But in July, the support broke, and the stock dropped below it. When this happened, a number of the people who purchased shares regretted doing so. Many decided to sell their stock if they could eventually do so without losing money.
Now that the stock has rallied back to this level, these unhappy buyers are placing sell orders. This will allow them to finally exit their positions at breakeven.
There are so many of these orders that it has created resistance.
If the buyers can eventually overpower the sellers and the resistance breaks, it could be the beginning of a new uptrend. It will show that the sellers who created the resistance have left the market. They have either canceled or finished their orders.
With this large amount of supply off the market, the stock may be positioned to move higher. The long downtrend may finally be over.
Read Next:
Image: Shutterstock