AT&T Inc. (NYSE:T) is trading sideways on Friday, after shares made a large move higher yesterday. There is a good chance there is some follow-through.  This is why AT&T is the Stock of the Day.

Successful traders understand ‘price action'.

The action in AT&T was strong yesterday. Not only did it make a large move higher, it opened near the lows of the day, and it closed near the highs of the day. This means the bulls may have taken control.

A useful analogy is a football game. The bears (red candles) got the ball to the bull’s (blue candles) goal line at the $25.50 level.

The bull’s defense held out, the bear’s couldn't get into the end zone, and the momentum has completely shifted in the other direction.

AT&T Chart

There was support around the $25.50 level because it had been a resistance level. Resistance can convert into support because of sellers' remorse.

Some of the people who sold their shares in October and November thought they made a good move when the price went lower. But when this resistance was broken, and the price moved higher in January, a number of them came to think they made a mistake.

Some of them vowed that if and when it was eventually possible to, they would repurchase the shares at the price they were sold for.

When AT&T dropped back to around $25.50 this week, these remorseful sellers entered the market as buyers. They put a floor under the price.

The reason why this level was resistance is because it had previously been a support level.

In July, a downtrend ended at this level, and the shares reversed. When this happened, people who purchased shares thought they made a good move.

But when the support broke in October, some of these traders decided buying was a mistake. They also decided they would sell their shares at breakeven if they could eventually do so.

When the stock returned to the former support level, they placed sell orders, and the large quantity of these orders formed resistance.

Successful traders can identify important price levels and use this knowledge to profit.

Image: Courtesy of AT&T