Stock Of The Day: Bank Of America Breaks Out

Bank of America Corporation BAC is trading higher on Tuesday. The shares appear to be breaking out. This can be a bullish dynamic and it would suggest the stock will continue to trade higher.

This is why Bank of America is our Stock of the Day.

With the market at all-time highs, it isn't a surprise that there are many stocks breaking out. Bank of America is one of them.

If a stock is in an uptrend, it is because the market for it is out of equilibrium. There are more shares to be bought than to be sold. Buyers are forced to outbid each other to draw sellers in off of the sidelines.

This pushes the price up.

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Resistance is a price level or narrow zone where there is a lot of sell interest. There are enough sell orders to fill all of the buy orders. This is why rallies end or pause when they reach resistance.

Sometimes, stocks reverse and trend lower after hitting resistance.

This happens when sellers become anxious and impatient. They know that those who wish to buy will go to whoever is willing to sell at the lowest price.

Anxious sellers don't want other traders to undercut them. So, they reduce the prices they are willing to sell at. Other anxious sellers see this and do the same thing. This can result in a snowball effect that forces the price lower.

But sometimes when a stock reaches resistance, the buyers eventually overpower the sellers and move the price above. This is called a breakout.

Breakouts can be a bullish dynamic for a stock. It shows that the investors and traders who created the resistance with their sell orders have left the market. They have either finished or canceled their orders.

With this large amount of supply taken off the market, buyers may need to outbid each other again to draw sellers back in. This can create a new uptrend and it may be happening with Bank of America.

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