Shares of Warner Bros. Discovery, Inc. (NASDAQ:WBD) are trading higher Monday. The company said it has reached a deal with the National Basketball Association. The agreement will extend the media partnership for an additional 11 years. Warner Bros also said that it has resolved all recent disputes related to the NBA's media agreement.

This development has made Warner Bros. our Stock of the Day.

Warner Bros sued the NBA in July. This occurred after the league gave broadcast rights to Comcast Corporation (NASDAQ:CMCSA), ESPN, and Amazon.com, Inc. (NASDAQ:AMZN). This was to be an 11-year deal worth $77 billion.

Warner Bros said this was a violation of their agreement. A clause in the contract stated that the company had the right to match offers from a third party.

The chart of Warner Bros illustrates an important technical analysis dynamic that is common in the financial markets. Certain price levels can have more importance than others. As you can see on the chart, this has been the case with the $9.25 level for the stock.

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In November 2023, it was a support level. Then, in March, it turned into resistance.

This shift occurred because traders and investors who previously bought shares near the support level experienced losses when the stock price broke below that level. As the price attempted to recover, these investors sold their positions at the $9.25 level, creating resistance.

So, they placed sell orders at the same price that had been support. There were so many of these orders that it caused resistance to form and put a top on the price.

But when the stock broke through the resistance and moved higher, many of the traders and investors who sold at $9.25 decided to buy their shares back at the same price they were sold for.

When the stock dropped back to $9.25, they placed buy orders. There were so many of these orders that if reformed support at the same price that was resistance.

Successful traders know that it is important to understand a company's fundamentals. But they also understand that psychology can influence prices too. Remorseful buyers can turn what had been support into resistance. Regretful sellers can turn what had been resistance into support.

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