When a stock reaches a point of support, such as an old high, a moving average, or a trend line, it can experience a sharp rise in price. This can be compared to dropping a ball onto a concrete sidewalk, where the sidewalk provides a strong support and causes the ball to bounce sharply. However, not all support is strong enough to create a bounce. We typically look for old tops, breakout points, and good money flow to determine if a bounce is likely. As long as the market is stable, we can expect to see a bounce off of this solid support.
