Shares of Micron Technology, Inc. (NASDAQ:MU) are moving lower on Tuesday. They have gained almost 300% since January 1.
Micron is the Stock of the Day. It appears to be breaking out again. The rally may continue.
If a stock is trending higher, there is more demand for it than there is supply. Investors and traders who wish to acquire shares are forced to outbid each other and pay premiums to attract sellers.
This forces the shares into an uptrend.
The dynamic changes when the shares reach a resistance level. At these levels, there is enough supply of shares for sale to fill all buy orders. Buyers can acquire all the shares they need to without paying higher prices, and the rally ends or pauses.
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 become concerned that other sellers will be willing to sell at lower prices.
They know the buyers will go to whoever is willing to sell at the lowest price. As a result, they reduce their offer prices. Other concerned sellers see this and do the same.
This can result in a snowball effect that pushes the price lower.
Sometimes when stocks reach resistance, the buyers eventually overpower the sellers, and the price moves higher. When this happens, traders say it is a ‘breakout’.
Breakouts can be a bullish dynamic. They show that the sellers who created the resistance are gone. With this supply removed from the market, buyers will be forced to outbid each other again. This can put the shares into a new uptrend.
As you can see on the chart, Micron broke out in April. It also broke out in May. A move higher followed each.
The stock had been attempting to break out, but as of Tuesday’s pullback, it remains below resistance around $1,090. Micron will need to clear that level to confirm a new uptrend.
MU Price Action: Micron Technology shares were down 4.05% at $1043.91 at the time of publication on Tuesday, according to Benzinga Pro data.
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