American Airlines Group Inc. (AAL) shares are moving higher on Wednesday. Some analysts attribute the move to the recent sell-off in the oil markets.
The shares could be breaking out, and this could be a bullish dynamic suggesting the rally will continue. This is why American Airlines is the Stock of the Day.
• American Airlines Group stock is approaching key resistance levels. What’s next?
If a stock is trending higher, there is more demand for it than there is supply. Those who wish to acquire shares have no choice but to outbid each other to attract sellers into the market.
This forces the shares into an uptrend.
The situation changes when the shares reach resistance. There is a large amount of supply or shares for sale.
Investors and traders can buy all the shares they wish to without pushing the price higher. This is why rallies end or pause when they reach resistance.
Sometimes stocks reverse and head lower after they reach resistance.
This happens when some of the traders and investors who created the resistance with their sell orders become anxious and impatient. They are worried others will be willing to sell at a lower price than they are.
And they know the buyers will go to whoever is offering shares at the lowest price.
As a result, they reduce the prices at which they are trying to sell their shares. Other concerned sellers see this and do the same. This can cause a snowball effect that pushes the price lower.
Sometimes, buyers eventually overpower sellers at resistance, and the price goes higher. When this happens, traders say it’s a breakout.
Breakouts are considered to be a bullish dynamic. They show that the sellers who created the resistance are gone. They have either finished or canceled their orders.
With this supply taken off the market, the stage is set for a new uptrend. Buyers will be forced to outbid each other again, and this can move the shares higher.
As you can see on the chart, American Airlines has broken the resistance around the $16.25 level. The rally may continue.
Photo: Shutterstock
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