Shares of Robinhood Markets, Inc. (NASDAQ:HOOD) are moving higher on Thursday after they stalled out at a resistance level. But they may be about to break out. This can be a bullish dynamic, suggesting a move higher. This is why we have made Robinhood the Stock of the Day.
In the market, if there aren't enough sell orders to fill all the buy orders, the buyers are forced to outbid each other and pay premiums if they want to acquire shares. This forces the stock into an uptrend.
When the uptrend reaches a resistance level, the tide turns. There is a large amount of supply or sell orders at these levels. Buyers can buy as many shares as they want to without pushing the price higher.
Robinhood Hits Resistance
Rallies end or pause when they reach resistance levels. As you can see on the chart below, Robinhood hit resistance around the $105 level yesterday.
It isn't a coincidence that there is resistance at this level. It was a support level in November, and levels that had previously been support can turn into resistance.
This is a common occurrence in the financial markets. It happens because of remorseful or regretful buyers.
People who purchased shares at around $105 in November realized their decision was a mistake when the support level broke. Some of them also decided to hold onto their losing positions, but they also decided to exit at breakeven if they could eventually do so.
When the shares rallied back to $105, these remorseful buyers placed sell orders. This resulted in resistance forming at the same price that had been supported.
If a stock eventually breaks or trades above the resistance, it can be a bullish dynamic. It shows that the sellers who created the resistance have left the market. They have canceled or finished their orders.
With this large amount of supply taken off the market, buyers will once again be forced to outbid each other to acquire shares. This dynamic could move Robinhood higher.
Image: Shutterstock
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