MicroStrategy (MSTR) technical analysis - Strategy (NASDAQ:MSTR)

MicroStrategy Incorporated MSTR is trading higher Monday. It may be breaking the resistance that has been around the $441.50 level.

We have made MicroStrategy our Stock of the Day because breakouts tend to be bullish. There is a good chance it will be followed by a move higher.

Successful traders understand market psychology. For example, they know that one of the reasons why resistance forms is due to remorseful buyers trying to sell. People buy stocks and then regret doing so if price drops after.

Some of them decide that they will hold onto these losing positions, but they also decide that if they can eventually do so, they will exit at breakeven. So, if the stock rallies back up to their buying price they will sell.

If there is a large amount of these sell orders, it will create resistance.

As you can see on the chart, there was resistance for MicroStrategy around $441.40 in November and December. Each time the stock reached this level, it reversed and went lower. When this happened, some of the people who bought shares while the stock was at the resistance decided that buying was a mistake.

So when MicroStrategy recently returned to this level, selling by these remorseful sellers created resistance at the price again.

If the stock can get and hold above this resistance, traders will say it's a ‘breakout'.

This isn't just symbolic. It illustrates an important supply and demand dynamic. It could mean that the traders and investors who created the resistance with their sell orders are out of the way.

They have either finished or canceled their orders.

Regardless of the market, if supply (sellers) is taken out of it, the demand side (buyers) will be forced to be aggressive if they want their orders to be executed.

Buyers will cut ahead of each other and outbid each other in order to draw sellers back into the market. This could force the stock into an uptrend. It may be about to happen with MicroStrategy.

Read Next: