Not surprisingly, shares of Palantir Technologies Inc. (NYSE:PLTR) staged a meaningful reversal off of a resistance level. This type of price action occurs frequently in the market.

Sometimes, the sellers who created the resistance with their sell orders start to undercut each other's prices. They know the buyers will go to whoever has the lowest price. This can push the price down.

But other times, shares move higher through the resistance. This is called a "breakout" and these can have bullish implications.

It's why Palantir is our Stock of the Day. As you can see on the chart, a breakout could be underway.

Read Also: What's Going On With Palantir Stock Today?

Stocks move higher when the bulls can't find all the shares they wish to buy at the current price levels. There isn't enough supply, or sell orders, in the market. As a result, if they want to acquire shares, they are forced to push the price higher to draw sellers into the market. This makes the stock trend upwards.

When a stock reaches a resistance level, the tide turns. The buyers can buy all the stock they want without pushing the price higher. And as we have seen, sometimes stocks can reverse after they reach resistance.

But sometimes they trade higher through the resistance. This "breakout" isn't just symbolic. It illustrates an important supply and demand dynamic. It means the people who created the resistance with their sell orders have finished or canceled their orders. Either way, they are out of the market.

With this supply out of the way, the stage could be set for another move higher. The bulls may not be able to buy all the shares they wish to at the current levels. They may be forced to push the price higher once again to get new sellers interested. This could be about to happen with Palantir.

Successful traders know that in the stock market, some price levels are more important than others. And when they know which ones are, they can get insight into when a new trend will begin. The profits will follow.

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