Cooper Companies, Inc. (NASDAQ:COO) is trading higher on Friday. There is a chance that the stock goes into a new uptrend.
It is oversold and at support. These can be bullish dynamics that set the stage for a move higher. This is why Cooper is the Stock of the Day.
Check out what COO shares are currently doing here.
Most of the time, a stock stays within its average or typical trading range. But sometimes, traders and investors can be emotional and aggressive, pushing the price below this range. When this happens, the stock is said to be oversold.
This is important.
Many trading strategies and methods are based on the concept of reversion to the mean. If something gets overextended, traders will be anticipating a reversal.
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Oversold conditions will draw buyers into the market. They will be expecting a move higher, and their buying could put upward pressure on the stock.
There are many ways to determine if a stock is oversold. One is the use of Bollinger Bands.
The red line on the chart is a Bollinger Band. It is two standard deviations below the 20-day moving average.
According to statistics and probability theory, 95% of trading should occur within two standard deviations the mean. If a stock has exceeded this threshold to the downside, it is considered to be oversold.
As you can see, that is the case now.
The Cooper Companies is also at a support level. Support is a price level where there is a large amount of buy interest for a stock. Selloffs tend to end when they reach these levels.
Sometimes stocks rally after they reach support. This happens when some of the buyers who created the support become anxious and start to raise the prices they are willing to pay.
They know the sellers will go to whoever is willing to pay the highest price. Other anxious buyers see this and do the same thing. This could result in a bidding war that forces the price into an uptrend.
The combination of being oversold while at support means there is a good chance Cooper moves higher.
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