Stock Of The Day: Breakout In Northrop Grumman

Shares of Northrop Grumman Corporation (NYSE:NOC) are trading slightly lower on Wednesday. This comes after yesterday's breakout.

Breakouts tend to be bullish for a stock. An uptrend usually follows. This is why it is the Stock of the Day.

Markets move due to supply and demand.

If a stock is trending higher, it's because there are more shares to be bought than there are for sale. Those who wish to buy are forced to outbid each other. This is the only way they can draw sellers into the market.

It forces the stock into an uptrend.

When a resistance level is reached, the dynamic changes. There are as many or more shares for sale than there are to be bought. Buyers can buy all they wish to without pushing the price any higher.

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Sometimes, a stock reverses and trends lower after reaching resistance. As shown in the chart below, this is what happened when Northrop Grumman reached the $540 level in October 2024. It also happened in April.

Stocks can sell off at resistance due to anxious sellers.

These sellers are worried that other sellers will be willing to sell at a lower price than they are. They know that buyers will go to whoever offers the best price.

As a result, these anxious sellers reduce their offering prices. Other anxious sellers see this and do the same thing. This can result in a snowball effect that forces the price into a downward trend.

However, sometimes when a stock reaches resistance, buyers eventually overpower sellers and push the price higher. This is called a breakout. It happened with Northrop yesterday.

Breakouts are considered to be a bullish dynamic.

If a stock can trade and hold above resistance, it means that the traders and investors who created the resistance with their sell orders are gone. They have either finished or canceled their orders.

With this large amount of supply removed from the market, buyers will once again be forced to outbid each other if they want to acquire shares. This can push the stock into an uptrend and it may be about to occur with Northrop Grumman.

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