Micron Technology, Inc. (NASDAQ:MU) shares are trading sideways on Friday. This follows a 3.8% move lower yesterday after the company reported its earnings.

The stock is at an important price level. Traders are watching it closely to see if the recent move higher will become a ‘bull trap' or ‘false breakout'. This is why Micron is the Stock of the Day.

There are price levels in the stock market where there are large amounts of supply or shares for sale. Traders call these resistance levels.

If a market is trending higher, it is because there isn't enough supply or sell orders to fill all the demand or buy orders. Traders and investors outbid each other to draw sellers into the market. This puts the shares into an uptrend.

These uptrends end when they reach resistance. All the buy orders can be filled at resistance levels.

Sometimes, stocks reverse and trend lower after reaching resistance. This happens when some of the sellers who created the resistance become anxious and impatient. They start to worry that other sellers will undercut their prices, and they know that's where the buyers will go.

As a result, they reduce their offering prices. Other anxious sellers see this and do the same. It puts the shares into a downtrend.

Sometimes at resistance levels, the buyers eventually overpower the sellers, and the price moves higher. This is called a ‘breakout'. It is considered a bullish dynamic because it shows that sellers have left the market.

Sometimes it may look like a breakout, but after a short time the stock reverses below the resistance level and heads lower. This is called a ‘bull trap' or ‘false breakout'.

Traders are watching Micron closely. As you can see on the chart, it is currently testing resistance around $440. Traders will soon know if this is a real breakout or if people will get sucked into a ‘bull trap'.

Image: Shutterstock