Breakout

A breakout occurs when the price of a stock breaks through a resistance level, often on high volume. The resistance level is usually a price ceiling at which the stock has previously encountered selling.

breakout

A breakout occurs when the price of a stock breaks through a resistance level, often on high volume. 


Breakout Identification

The resistance level is usually a price ceiling at which the stock has previously encountered selling. In many cases, but not always, that resistance level is the highest point in a "handle" portion of a base pattern.

Stock chart illustrating a breakout above a resistance level.

Breakouts are easily spotted on Point & Figure charts as illustrated below.

Point and Figure chart illustrating a stock price breakout.

Interpretation of Breakout

Technical traders will buy the security when a price breakout occurs as it is likely that additional buying pressure will follow.

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