Robinhood Markets, Inc. HOOD is reporting its Q2 earnings tomorrow morning. Analysts are looking for 15 cents per share.
The shares appear to be breaking out ahead of this. This is why our team of trading experts has made it our Stock of the Day.
When a stock is moving higher there isn't enough supply (sell orders) to fill all of the demand (buy orders). As a result, buyers are forced to pay premiums and this forces the shares into an uptrend.
But if the stock reaches a resistance level the rally may reverse or at least pause.
Resistance is a large group of traders and investors looking to sell at or close to the same price. At a resistance level, there is enough supply to fill all the demand.
Sometimes stocks sell off after they hit resistance. This happens when some of the people who created the resistance become worried. They are concerned that others will reduce the prices they are willing to sell at.
They know that the buyers will go to whoever is willing to sell at the lowest price. As a result, these worried sellers reduce the prices they are willing to sell at. Other concerned sellers see this and do the same thing. This results in a snowball effect that pushes the stock lower.
But sometimes the shares can work their way through resistance and move above it. Traders refer to this as a ‘breakout'.
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Breakouts typically have bullish implications.
If the price moves above resistance, it illustrates an important market dynamic. It means that the traders and investors who created the resistance with their sell orders have left the market. They have either finished or canceled their orders.
This could set the stage for a move higher.
As new buyers enter the market, they will have a hard time finding someone to buy shares from. As a result, they will be forced to pay premiums to get the interest of sellers. This could force the shares into a new uptrend.
It may be about to happen with Robinhood.
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
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