Breakout

What is a 'Breakout'

A price movement through an identified level of support or resistance, which is usually followed by heavy volume and increased volatility. Traders will buy the underlying asset when the price breaks above a level of resistance and sell when it breaks below support.
 

 

Breakout

This chart shows a stock that has historically encountered a lot of resistance near $37, but notice how it heads sharply higher following the breakout.

BREAKING DOWN 'Breakout'

In practice, a breakout is most commonly used to refer to a situation where the price breaks above a level of resistance and heads higher, rather than breaking below a level of support and heading lower. Once a resistance level is broken, it is regarded as the next level of support when the asset experiences a pullback Most traders use chart patterns and other technical tools such as trendlines to identify possible candidates that are likely to break through a support/resistance level.

A breakout is the bullish counterpart to a breakdown.

RELATED TERMS
  1. Breakdown

    A price movement through an identified level of support, which ...
  2. Breakout Trader

    A type of trader who uses technical analysis to find potential ...
  3. Failed Break

    A price movement through an identified level of support or resistance ...
  4. Buy Break

    A type of recommendation to buy an asset once the price is able ...
  5. Resistance (Resistance Level)

    A chart point or range that caps an increase in the level of ...
  6. Trading Channel

    When charting the price of an asset, this is the space on the ...
Related Articles
  1. Trading

    Pros and Cons of These Breakout Stocks (FB, IM)

    These stocks are breaking out, or close to it. Here are the pros and cons of trading these stocks right now.
  2. Trading

    Watch These 3 Stocks for Breakouts (SAP, ORI)

    These three stocks are close to short-term pattern breakout levels.
  3. Trading

    Watch for These Stock Breakouts (or Failed Breakouts) (MNK, ALLY)

    These stocks are setting up for a breakout. But it's important to keep in mind what could happen if the breakout fails to move as anticipated.
  4. Markets

    Watch These Stocks Closely For a Breakout

    Here are three stocks to watch for breakouts right now.
  5. Trading

    Watch for These ETF Breakouts (RSX, TLT)

    These ETFs are close to breakout levels, which could set the stage for the next major rally or decline.
  6. Trading

    3 Reasons Not To Trade Range Breakouts

    Trading range breakouts is unprofitable for most novice traders; here are some alternatives that can be used.
  7. Markets

    Breakout Opportunity Stocks: CPA, GNRC, WWE

    After a period of contracting volatility, watch for breakouts and bigger moves to come in these stocks.
  8. Markets

    Watch For Stock Breakouts Here

    Four stocks with potential breakouts across various time frames and pattern.
  9. Trading

    Continuation Patterns: In-Depth Look At Triangles

    We take a closer look at ascending and descending triangles to help traders predict the ultimate breakout direction.
  10. Trading

    Watch These Global Market ETFs for Big Breakouts (EWZ, PIN)

    These four global market ETFs are all heading toward breakouts right now. Here's what to watch for, and where these ETFs could be heading next.
RELATED FAQS
  1. What is the difference between forex Pivot Points and forex Levels of Support & resistance?

    Understand the differences between pivot points and levels of support/resistance in an asset's price movements, both in and ... Read Answer >>
  2. What are the best technical indicators to complement the Volatility Ratio?

    Learn why using the volume indicator with the volatility indicator helps investors identify breakouts from established trading ... Read Answer >>
  3. What are some common strategies used when a stock is under consolidation?

    Read more about what trading opportunities can be realized while a stock is under consolidation and trading within a seemingly ... Read Answer >>
  4. What is the pitchfork indicator that I keep hearing about, and how do I use it?

    The technical indicator known as Andrew's Pitchfork is not that well-known, and it's rarely used by novice traders. However, ... Read Answer >>
  5. How do I build a profitable strategy when spotting wedge-shaped patterns?

    Learn how to trade wedge shaped patterns and when to buy or sell wedge breakouts with support and resistance levels to create ... Read Answer >>
  6. How do traders use Bollinger Bands® to identify a breakout?

    Learn how traders use Bollinger Bands to identify breakouts. Breakouts are moves in price to new highs. Buying breakouts ... Read Answer >>
Hot Definitions
  1. GBP

    The abbreviation for the British pound sterling, the official currency of the United Kingdom, the British Overseas Territories ...
  2. Diversification

    A risk management technique that mixes a wide variety of investments within a portfolio. The rationale behind this technique ...
  3. European Union - EU

    A group of European countries that participates in the world economy as one economic unit and operates under one official ...
  4. Sell-Off

    The rapid selling of securities, such as stocks, bonds and commodities. The increase in supply leads to a decline in the ...
  5. Brazil, Russia, India And China - BRIC

    An acronym for the economies of Brazil, Russia, India and China combined. It has been speculated that by 2050 these four ...
  6. Brexit

    The Brexit, an abbreviation of "British exit" that mirrors the term Grexit, refers to the possibility of Britain's withdrawal ...
Trading Center