Pfizer Inc. (NYSE:PFE) shares are lower on Thursday due to news that President-elect Donald Trump picked Robert F. Kennedy Jr. as his next secretary of the Department of Health and Human Services. This has some investors concerned because Kennedy was critical of certain vaccines and vaccinations.
Some believe the weakness in the stock may present a buying opportunity. This is why our team of expert traders and technical analysts has made it our Stock of the Day.
On Wall Street, many trading strategies and methods are based on the concept of reversion to the mean. If something goes too far one way, there is a good chance that it reverses and comes back the other way.
Most of the time, a stock stays in what is known as its trading range. But sometimes investors and traders can become emotional and aggressive. They can push the shares out of the range.
When this happens, there may be opportunities to profit. There is a good chance there will be a reversion back to the mean.
Read Also: WHO Calls Vaccines ‘Absolutely Critical’ As Trump’s Appointment Of RFK Jr Pulls Pzifer, Moderna Stocks Downhill
If a stock is below its typical or average range, traders say that it is “oversold.” Some anticipate a reversal back to the average. This would mean a move higher.
So, they enter the market as buyers. This could put pressure on the stock and force the price higher. It could become a self-fulfilling prophecy.
The lower part of the chart is the Relative Strength Index (RSI) momentum indicator. When the blue line crosses below the horizontal red line, it indicates oversold conditions. As you can see, that is the case now. Pfizer is very oversold.
There is also another reason why the stock may reverse and head higher.
The shares have dropped to a price level that was support in April. Stocks tend to have support at levels that had been support before. Sometimes they can even rally off of support.
There are traders and investors who sold at the support level in April and regretted doing so when the price moved higher. Some decide to buy their shares back if they can at the same price they were sold.
So, now that the shares are back to their selling price, they are placing buy orders. This creates support.
The combination of being oversold and at support means there is a good chance Pfizer reverses and heads higher.
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