The idea of resistance is regularly used by technical traders to assess the price at which selling interest could emerge in a stock. Conventionally, technical analysts visually look over stock price charts to detect the levels at which the stock’s price showed a significant reversal to form a prominent peak or trough on the chart.
Reversal points situated higher than the current market price are typically called resistance levels, while those reversals that occurred below the current market price are called support levels.
When a stock’s price rises sufficiently to overcome selling interest at a resistance level and break above it, it sends a bullish signal to a technical trader who might then consider entering into a long stock position or covering an existing short stock position.
If the trader then chooses to buy the stock, they might enter a stop loss sell order safely under the exceeded resistance level to protect their long position against losses if the market comes off to again trade below the broken resistance point.
Traders might also seek confirmation for the trade signal by looking for additional buying interest to emerge as the resistance level is broken by watching for an increase in trading volume. They could also check key momentum indicators, like the Relative Strength Index or RSI, to see if new highs in the indicator correspond to fresh highs in the price.
Below is a comprehensive list of stocks breaking out above resistance. These scans use an algorithmic review of stock prices to determine what stocks have broken and still trade above computed resistance levels and could therefore present an interesting buying prospect for stock traders.
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