Shares of Lucid Group, Inc. LCID are rising Thursday but they have run into resistance around the $3.25 level. There is a chance this resistance breaks and the stock keeps moving higher.
Breakouts tend to be bullish. This is why our team of traders has made Lucid our Stock of the Day.
Markets are always trending. They are either going up, down, or sideways. If a market is trending higher the bulls are in control. If it is heading lower, the bears are in charge. If they go sideways, the bears and bulls have equal strength.
Sometimes, when the leadership changes from bears to bulls or bulls to bears, the price action can appear on a chart as a reversal pattern.
If the change occurs in one day, a reversal day pattern may appear. If it takes place over a few days, a V or Inverted V pattern may show up.
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If the change is slow and steady over an extended time, it may create a rounded top or rounded bottom pattern.
As you can see on the chart, a rounded bottom formed in Lucid. The bulls slowly took charge in November and the stock has been rallying since.
There is resistance at the $3.25 level because it was previously support. Resistance forming at prices that had been support is a common occurrence in the stock market. It happens because of buyer’s remorse.
There are traders and investors who purchased shares while they were at support who came to regret doing so when the support broke and the price moved lower. A number of these remorseful buyers decided to exit their positions if they can do so at breakeven.
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As a result, now that the stock has rallied back to their buying prices, they are placing sell orders. This has caused resistance to form at the level that had been support.
If the stock gets above and stays above this resistance, traders will call it a breakout. This is a bullish dynamic because it shows that the sellers who created the resistance are out of the way. They have finished or canceled their orders.
This may set the stage for a move higher. Buyers will need to bid premiums to draw sellers back into the market. This could force the stock into a new uptrend and that may be about to happen with Lucid.
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