Shares of Walmart Inc. (NYSE:WMT) look like they may be about to move higher. The stock appears to be breaking out.
Breakouts tend to be a positive development in financial markets. This is why our team of trading experts has made Walmart our Stock of the Day.
Resistance is a large concentration of investors and traders who are trying to sell their shares at, or close to, the same price. When a stock moves higher and reaches a resistance level, the rally tends to end or pause. As you can see on the chart, there has been resistance for Walmart around the $77.30 level.
A 'breakout' occurs when a stock trades and holds above a resistance level. Breakouts tend to be bullish for a stock. It means that the large group of traders and investors who created the resistance with their sell orders are out of the way.
They have either finished or canceled their orders.
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When a large amount of supply (sell orders) is taken out of a market, it could set the stage for a move higher. It means that to acquire shares, buyers will have to be aggressive. They will have to pay higher prices to draw sellers into the market.
This action can force the shares into an uptrend.
A resistance level can remain intact for an extended period due to market psychology. Investors who purchased shares near this level may feel they made a mistake when the price reversed and the stock sold off, leading to buyer's remorse.
A number of these disappointed investors and traders decide to sell their positions if they can get out of them without losing any money. As a result, if the stock moves back up to their buying prices, they try to sell.
If investors have the opportunity to sell their shares at the same price they originally bought them, they can exit their positions at breakeven. When enough sell orders are placed at this level, it creates resistance, preventing the stock from moving higher.