Stock Of The Day: Is Victoria's Secret Breaking Out?

Victoria’s Secret & Co. (NYSE:VSCO) shares are quiet on Monday. Last week, they made a big move higher after reporting strong earnings.

The stock is testing important resistance and could be on the verge of a breakout. This would mean a move higher. It's why Victoria's Secret is our Stock of the Day.

Some price levels have more importance than others. These are called support and resistance levels.

At support levels, there is enough demand or buyers to take in all of the supply or sell orders. This is why selloffs end or pause when they reach support.

The opposite is true at resistance.

There is enough supply or sell orders to fill all of the demand or buy orders. This is why rallies end or pause when they reach resistance.

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Resistance and support levels can retain their importance for a long time. It could be months or even years. Traders refer to this as “market memory.”

As you can see on the chart, levels around $48.25 first became resistance for Victoria's Secret in late 2022. It has been resistance since then.

Resistance can stay intact because there are people who regret buying shares at the resistance level when the price drops afterward. Some of these unhappy buyers decided to hold onto their losing positions, but they also vowed to get out at breakeven if they could.

So if and when the shares rally back to the resistance level, they place sell orders. If there is a large quantity of these orders, it creates resistance at the level again.

The stock is back at this resistance, and it may break through. This means the buyers may be poised to overpower the sellers and push the price above the resistance level.

If the stock is above the former resistance, it could mean the sellers have finished or canceled. With this supply off the market, the stage may be set for a move higher, as buyers will be forced to outbid one another to draw sellers back in.

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