Breakout
Definition of '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.![]() 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. |
|
Investopedia explains '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 Definitions
Articles Of Interest
-
Trading Failed Breaks
Learn how to capitalize on the predictable behavior of others during breakouts and breakdowns. -
Backspreads: Good News For Breakout Traders
This bullish trading strategy offers unlimited potential profit with limited risk. -
What Your Trading Charts Aren't Telling You
You may be missing some key statistics when following charts in the market. -
Capitalize On False Breakouts In The Danger Zone
Sometimes you have to be a predator to profit. Find out how to cash in on false breakouts. -
3 Reasons Not To Trade Range Breakouts
Trading range breakouts is unprofitable for most novice traders; here are some alternatives that can be used. -
The Anatomy Of Trading Breakouts
We'll walk you through this trading strategy from start to finish. -
How can I determine a stock's next resistance level or target price?
Determining where the price of an asset will stop once it has created a new high is one of the most difficult tasks for any trader. There is no magic way to determine what price an asset is likely ... -
Support And Resistance Reversals
Discover how these influential levels can switch roles. -
A Primer On The MACD
Learn to trade in the direction of short-term momentum. -
War's Influence On Wall Street
Blitzkrieg? Dawn raids? Sounds like the markets and the battlefield have a few things in common.

Free Annual Reports