Failed Break

DEFINITION of 'Failed Break'

A price movement through an identified level of support or resistance that does not have enough momentum to maintain its direction. Since the validity of the breakout (or breakdown) is compromised, many traders close their positions and the price fails to make the sharp move that many were expecting.

A failed break is also commonly referred to as a "false breakout".

Failed Break

BREAKING DOWN 'Failed Break'

As you can see from the chart above, technical traders who identified the descending triangle would expect a substantial move lower once the price was able to break below the $21.50 support. However, in the event of a failed break, the move lower would not occur and many traders would be forced to realize a significant loss. Many technical traders will use other technical indicators to confirm that the breakout is valid and that the momentum will likely continue.

RELATED TERMS
  1. Breakdown

    A price movement through an identified level of support, which ...
  2. Resistance (Resistance Level)

    A chart point or range that caps an increase in the level of ...
  3. Breakout

    A price movement through an identified level of support or resistance, ...
  4. Descending Triangle

    A bearish chart pattern used in technical analysis that is created ...
  5. Momentum

    The rate of acceleration of a security's price or volume. The ...
  6. Support (Support Level)

    The price level which, historically, a stock has had difficulty ...
Related Articles
  1. Active Trading

    Spotting Breakouts As Easy As ACD

    Wondering what it means to be a "logical trader"? Take a look at this system devised by Mark Fisher.
  2. Active Trading

    Trading Failed Breaks

    Learn how to capitalize on the predictable behavior of others during breakouts and breakdowns.
  3. Active Trading Fundamentals

    Gauging Support And Resistance With Price By Volume

    This straightforward histogram can help you analyze the buying and selling interest in a stock.
  4. Active Trading Fundamentals

    Trade Broken Trendlines Without Going Broke

    Learn a stop-loss strategy that will help you protect your gains when trading breaks.
  5. Chart Advisor

    Sector Headwinds Buffeting First Solar (FSLR, TAN)

    First Solar has entered a new downtrend after failing to break out above two-year resistance.
  6. Chart Advisor

    Better Buy: Home Depot or Lowe's? (HD, LOW)

    Home Depot and Lowe’s have risen to resistance levels that could yield fresh trend advances.
  7. Chart Advisor

    3 Short Sales in the Apple Ecosystem (AAPL, SWKS)

    Deteriorating sentiment should offer profitable short sales on the key Apple suppliers.
  8. Chart Advisor

    Amazon Levels to Watch After Earnings (AMZN)

    An Amazon rally above 650 after earnings should open the door to a test of the bull market high.
  9. Chart Advisor

    Nasdaq-100 Weakness Waving Red Flags (QQQ, SPY)

    The Nasdaq-100 is lagging blue chip and small cap indices, signaling a bearish divergence that could end the recovery wave.
  10. Fundamental Analysis

    Alcoa vs. BHP Billiton: Which Is Better for My Portfolio?

    Obtain an up-to-date overview of BHP Billiton and Alcoa, Inc., two key players for investors seeking exposure to the aluminum market to consider.
RELATED FAQS
  1. What is Fibonacci retracement, and where do the ratios that are used come from?

    Fibonacci retracement is a very popular tool among technical traders and is based on the key numbers identified by mathematician ... Read Answer >>
  2. What are some of the most common technical indicators that back up Doji patterns?

    Learn important technical indicators that reinforce a doji candlestick pattern to take advantage of profitable trading opportunities. Read Answer >>
  3. Tame Panic Selling with the Exhausted Selling Model

    Discover what the exhausted selling model is and how it can be used by traders who are looking to profit from the panic sale ... Read Answer >>
  4. Point and Figure Charting Using Count Analysis

    See how traders use count analysis on point and figure charts, and learn why this method differs from more traditional types ... Read Answer >>
  5. What assumptions are made when conducting a t-test?

    Learn what a t-test is, and discover the five standard assumptions that are made regarding the validity of sampling and data ... Read Answer >>
  6. How are double exponential moving averages applied in technical analysis?

    Learn more about double exponential moving averages (DEMAS), and find out how traders commonly use DEMAs in technical analysis ... Read Answer >>
Hot Definitions
  1. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
  2. Society for Worldwide Interbank Financial Telecommunications ...

    A member-owned cooperative that provides safe and secure financial transactions for its members. Established in 1973, the ...
  3. Generally Accepted Accounting Principles - GAAP

    The common set of accounting principles, standards and procedures that companies use to compile their financial statements. ...
  4. DuPont Analysis

    A method of performance measurement that was started by the DuPont Corporation in the 1920s. With this method, assets are ...
  5. Call Option

    An agreement that gives an investor the right (but not the obligation) to buy a stock, bond, commodity, or other instrument ...
  6. Economies Of Scale

    Economies of scale is the cost advantage that arises with increased output of a product. Economies of scale arise because ...
Trading Center