Plug Power Inc. (NASDAQ:PLUG) may rally. It's oversold and at support. These dynamics tend to set the stage for a move higher. This is why our team of trading experts have named it our Stock of the Day.

“Oversold” means a stock is trading below what would be its usual or typical trading range. The sellers have been emotional and aggressive.

Investors and traders will come into the market as buyers because they will be expecting a reversion to the mean, or a move higher. And their buying could push the price up.

Momentum

The bottom section of the chart above is the Relative Strength Index (RSI).  There are many ways to measure momentum, and the RSI is one of the most popular.

When the blue line crosses below the horizontal red line, it indicates oversold conditions. As you can see that is the case now.

The chart shows that shares have only been this oversold twice this year, and both times a significant rally followed.

Support

Support is a large concentration of traders and investors who are looking to buy shares at, or close to, the same price. This is why selloffs tend to end or at least pause when they reach support levels.

The $2.30 level has been support for Plug Power Inc. since January.

Sometimes stocks reverse and rally after they fall to support. This happens because the buyers know the sellers will go to whoever is willing to pay the highest price. Some of the buyers become concerned that other buyers will outbid them.

As a result, they increase the prices they are willing to pay. Others see this and do the same thing. It could result in a bidding war that forces the shares into a new uptrend.

PLUG has dropped to a price level where there is a lot of buy interest. And the oversold conditions may pull new buyers into the market as well. This combination means there is a good chance that the shares move higher.

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