It looked like shares of Apple Inc. (NASDAQ: AAPL) were breaking out. There has been resistance around $149 and the stock traded higher, but it turned out to be a false breakout.
Now shares are trending lower. There’s a good chance they find support around the $144 level. This level provided support in July and it may do so again.
See Also: Why Apple Is A ‘Top Tech Name’ To Own Right Now
A false breakout occurs when traders are focused on a clear resistance level, like $149 for Apple. When the stock starts to trade above it, traders rush in and buy, which forces the price higher.
These traders think the sellers who created the resistance have left the market. They believe that with this supply out of the way, a new rally will form.
But if it doesn’t, as we see here, many of these traders decide to blow out of their stock. This causes a rapid decline in the price.
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