General Motors Company GM Shares are trading lower on Tuesday. They may also break support.

Stocks that break support tend to trend lower and that could be the case here. This is why our team of technical analysts chose us Stock of the day.

Some analysts don’t understand technical analysis. They try to recognize patterns on charts without understanding the price movement that causes them to form.

When understood and applied correctly, technical analysis is the study of supply and demand in a market.

When a stock is trending downward, there is not enough demand or buy orders to absorb all the supply or sell orders. This forces investors and traders willing to sell to offer their shares at a discount to attract buyers to the market.

This forces stocks into a downward trend.

When a stock falls to a support level, the situation changes. There is enough demand to absorb the entire supply. People can sell as many shares as they want without fear of the price dropping.

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As you can see in the chart, the $55 level has been a well-defined support for General Motors since early November. But that support could break.

When a stock trades below previous support, traders say the support has been “broken.” This is not just symbolic. It illustrates an important market dynamic.

It shows that the investors and traders who created support with their buy orders have disappeared. They have finished or canceled their orders. Either way, they left the market.

If this large amount of demand or buy orders is no longer in the way, the stage could be set for a new downtrend to emerge. To lure buyers back into the market, traders will once again be forced to offer their stocks at a discount to attract buyers’ interest.

This is why stocks tend to fall after breaking support levels. A new downward trend could be emerging at General Motors.

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