Stock Of The Day: Is AppLovin Headed Even Higher?

AppLovin Corp. APP shares are higher on Tuesday. The stock has gained more than $100 in just three weeks. There is a good chance this uptrend stays intact.

The shares have just broken out and may be about to refill a gap. This is why it is our Stock of the Day.

Resistance is a price or zone where there is a significant amount of sell interest.

If a stock is trending higher, it's because there aren't enough sell orders to fill all the buy orders. Those who wish to buy are forced to outbid each other. This pushes the price higher.

When a stock reaches a resistance level, the dynamic changes. There are enough shares for sale to fill all of the buy orders. People who wish to buy can purchase as many shares as they want without the price moving up.

Sometimes, the resistance eventually breaks. The buyers overpower the sellers and drive the price higher. Breakouts tend to be bullish. They show the traders and investors who created the resistance with their sell orders have left the market, either canceling or finishing them.

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With this large amount of supply taken off of the market, buyers may have to start outbidding each other to draw sellers back in. This could force the shares into a new uptrend.

One of the main reasons why there is resistance in a market is buyer remorse. People buy shares, but then regret doing so if the price falls after. Many decide that if they can eventually exit their positions at breakeven, they will.

So, it the stock rallies back to its buy price, investors place sell orders. If there is a large enough number of these sell orders, what had been a support level can turn into a resistance level. This is what happened at the $311 level with AppLovin.

When stocks rapidly fall through price levels like AppLovin did in February, there isn't enough time spent at these levels to create large groups of remorseful buyers who will be trying to sell on the way back up.

When the stock gets back to these prices going in the opposite direction, buyers may have a hard time finding sellers. They may need to be aggressive and push the price higher.

This could lead to a rapid move up. The uptrend in AppLovin may continue.

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