Dollar General Corporation (NYSE:DG) shares are trading higher Thursday. They may be breaking a resistance level. This could be a bullish dynamic, suggesting a continued move higher. This is why we have made Dollar General the Stock of the Day.
Like any auction market, the stock market is driven by supply and demand. If supply or sell orders don’t match demand or buy orders, the price will move higher.
This is because buyers are forced to be aggressive and outbid each other to attract sellers. This forces the stock into an uptrend.
The tide turns when the shares reach resistance. Sell orders are sufficient to fill all buy orders. This is why rallies end or pause at resistance levels.
As you can see on the chart, Dollar General had resistance around $132.50. This is where a rally ended in early September.
Sometimes, when a stock reaches a resistance level, buyers eventually overpower sellers and buy all the shares. When this happens, traders say it is a ‘breakout’.
Breakouts are considered to be a bullish dynamic. When they occur, it can be inferred or assumed that the sellers who created the resistance are gone. A breakout graphically illustrates supply being taken out of the market.
With that supply out of the way, buyers will once again be forced to outbid each other to draw sellers back into the market. This will force the shares into a new uptrend.
If Dollar General can break above and hold the resistance, a new bullish trend may form. The shares may continue to move higher.
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