Stock of the Day: Is Apple Breaking Out?

Apple Inc. (NASDAQ:AAPL) shares are moving higher on Tuesday.  They may be breaking resistance.

This could be a bullish dynamic that would suggest a further move higher. This is why Apple is the Stock of the Day.

If a stock is in an uptrend, it is out of equilibrium. There are more shares to be purchased than to be sold.

Because of this, investors and traders who wish to buy are forced to be aggressive and outbid each other. This forces the shares into an uptrend.

At a resistance level, the dynamic changes. There are enough shares for sale to fill all of the buy orders. This is why the price stops moving higher when a stock reaches resistance.

Sometimes stocks sell off after they reach these levels.

This happens when some of the people who created the resistance become anxious and impatient. They worry that other sellers will undercut them, knowing buyers will gravitate toward the lowest price. They don’t want to miss the trade, so they reduce their offer prices; other anxious sellers see this and do the same thing.

This results in a snowball effect that can force the price lower.

But sometimes when a stock reaches resistance, buyers eventually overpower sellers and push the price higher. When this happens, traders say it’s a “breakout.”

Breakouts are considered a bullish dynamic because they show that the sellers who created the resistance have left the market. They have either finished or canceled their orders.

With these sellers gone, buyers will once again be forced to outbid each other to get new sellers interested. This could force Apple into a new uptrend.

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