There has been more supply, or shares for sale, than there has been demand, or shares to buy, for ON Semiconductor Corporation (NASDAQ:ON), pushing the price lower.
There is a good chance that a new downtrend is forming. This is why our team of technical analysts has made it our Stock of the Day.
Sometimes, analysts overcomplicate technical analysis. They seem to forget that if understood and applied correctly, it is the analysis of supply and demand in a market.
If demand and supply are equal, or if there's more demand than supply, traders and investors who wish to sell can do so without any issues. But if there is more supply than there is demand, sellers will need to offer their shares out at a discount to get the interest of those who may wish to buy.
This will force the stock into a downtrend.
Price levels that have more demand than supply are called support levels. Downtrends pause or end when they reach support levels.
As you can see on the chart, the $61 level has been support for ON Semiconductor. Downtrends ended at this level in October 2023 and April 2024.
Sometimes stocks rally after they reach support. This happens when some of the buyers who created the support become concerned. They are worried that other traders and investors who wish to buy will increase the prices they are willing to pay for shares.
These concerned buyers know that the sellers will go to whoever is willing to pay the highest price. As a result, they increase the prices they are willing to pay. Other concerned buyers see this and do the same thing.
This could result in a bidding war or snowball effect that pushes the price higher. This is what happened the last two times ON reached $61.
However, this support level appears to have been broken, with shares closing below it.
This could mean the people who created the support with their buy orders have left the market. They have either canceled or finished their orders.
Sellers may be forced once again to push the price lower to get the attention of buyers. This could cause a new downtrend in ON Semiconductor.
