Stock of the Day: Did Hewlett Packard Break Out?

Hewlett Packard Enterprise Company (NYSE:HPE) shares are lower Thursday. They are testing an important resistance level. If they can clear is, it will be a ‘breakout’. A breakout can set the stage for a move higher. This is why Hewlett Packard is the Stock of the Day. Many new traders lose sight of the fact that the stock market is driven by supply and demand. For example, if demand for shares to buy exceeds supply of shares for sale, investors and traders will be forced to outbid each other and pay higher prices to execute their orders. This will create an uptrend. When a resistance level is reached, the dynamic changes. At these levels, supply is sufficient to satisfy all demand. That is why rallies end or pause at resistance. Sometimes stocks reverse and head lower after reaching resistance. This happens when some of the sellers who created the resistance become anxious and impatient. They worry that other sellers will sell at a lower price than they do, and they know this is where the buyers will go. As a result, they reduce their offer prices. Other anxious sellers see this and do the same. They start to undercut each other and it turns into a snowball effect that pushes the price lower. Sometimes, when a stock reaches resistance, the buyers eventually overpower the sellers. They buy all their shares, and then the price moves higher. When this happens, traders say it is a ‘breakout’. This can be a bullish signal. It shows that the sellers who created the resistance are gone. They have finished or canceled their orders. With this supply off the market, buyers will be forced to outbid each other again, pushing the price higher. Traders will be watching Hewlett Packard closely to see if it breaks out. If it does, there will be opportunities to profit. See More: Top Value Stocks Image: Shutterstock