7.10What is a breakout?
1What is it?
A breakout is when the price moves above resistance convincingly, ideally closing above it with high volume.
2Why does it exist?
It suggests buyers have overcome sellers, and a new up-move may start.
3Diagram
4Risks
- False breakouts are common: price pokes above and falls back.
- Wait for a close above, not just a touch.
5Quick revision
- Close above resistance.
- Volume confirms.
- Beware false breakouts.
6Knowledge check
Q1. What confirms a breakout?Show answer
A close above resistance with high volume.
Q2. What is a false breakout?Show answer
Price breaks out briefly then falls back.
Q3. Where can a stop be placed after a breakout buy?Show answer
Below the breakout level or recent low.