Breakout
Technical AnalysisQuick Definition
A price movement through an identified level of support or resistance.
Detailed Explanation
A breakout occurs when the price of an asset moves above a resistance level or below a support level on increased volume. Breakouts can be the start of major price moves and new trends, making them important signals for traders. True breakouts are typically accompanied by increased volume and momentum. However, traders must be cautious of false breakouts, where the price briefly penetrates a level but then reverses. Successful breakout trading requires confirming the move with volume and often waiting for a retest of the broken level.
Real Trading Example
If a stock has been trading between $45 and $50 for several weeks, a move above $50 on high volume would be considered a bullish breakout.