Palantir Technologies Inc. (NASDAQ:PLTR) is trading sideways on Tuesday. This follows yesterday's rally of 6.75%. It may have broken out yesterday. This could be a bullish dynamic, and it is why Palantir is the Stock of the Day.

Sometimes traders forget that the stock market is a market. Supply and demand determine prices and price moves.

If a market is trending higher, it is because there isn't enough supply (sell orders) to fill all the demand (buy orders). Those who wish to purchase shares must outbid one another to find sellers.

This forces the stock into an uptrend.

The tide turns when the trend reaches a resistance level. There is enough supply to fill all the demand.

There are times when stocks reverse and head lower after reaching resistance.

This happens when some of the traders and investors who wish to sell become anxious and impatient. They worry that others will be willing to sell at lower prices.

That's who the buyers will go to.

As a result, these anxious sellers reduce the prices they are willing to accept for their shares. Other impatient sellers see this and do the same.

This can force the shares into a downtrend as the sellers begin to undercut each other's prices.

But sometimes at resistance levels, the buyers eventually overpower the sellers. This makes the stock move higher.

Traders call this a ‘breakout.’ It is considered to be a bullish dynamic. It shows that the people who created the resistance have either finished or canceled their orders.

With this supply off the market, the stage is set for an uptrend. Buyers will need to outbid each other, and this could result in a new move higher.

There are times when a stock may clear the resistance for a short period of time, and then come right back down. Moves lower tend to follow these false breakouts.

As you can see on the chart, Palantir has reversed back below the resistance it traded above yesterday. Palantir shareholders will be watching to see if there is follow-through, or if yesterday's move was a false breakout.

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