Skip to main content


A breakout occurs when the price of an asset crosses above a resistance level or below a support area. Breakouts suggest that the price may begin to trend in the direction of the breakout. A breakout to the upside from a chart pattern, for instance, can signal that the price will begin to trend higher. High volume breakouts (compared to typical volume) demonstrate more conviction, which increases the likelihood that the price will trend in that direction.

A breakout occurs when the price breaks a resistance or support level.
Not all traders employ the same support and resistance levels, therefore breakouts can be subjective.
Generally, breakouts give traders the green light for entering a trade. Upward breakouts signal traders to buy or cover short positions. A negative breakdown suggests traders short or sell long positions.
High-volume breakouts reflect conviction and interest, therefore the price is more likely to follow the breakout.
Low volume breakouts are more likely to fail, hence the price is less likely to follow the breakout.

Meaning of Breakouts
The price breaks through a resistance or support level after being contained for some time. Many traders utilize resistance or support levels as entry or stop loss points. When the price breaks through a support or resistance level, traders who were looking to enter a trade take advantage of the breakout and jump in. On the other hand, those that were looking to exit a position or was expecting a different move, get out of their trades to prevent further losses, or to take profit.
This action often causes volume to grow, showing high interest in the breakout level. High volume confirms the breakout. If the breakout has low volume, the level may not have been noteworthy to many traders, or not enough traders were ready to trade near it. Low-volume breakouts often fail. If an upside breakthrough fails, price will return below resistance. If a bearish breakout (often referred to as breakdown), fails, the price will return above the support level.
Breakouts are often connected to consolidation patterns such as triangles, flags, wedges, rectangles and pennants. When the price moves in a certain way, support and/or resistance levels arise. Then, traders watch for breakouts. They may go long or short if the price breaks above resistance or below support.

Popular posts from this blog

Kal's Option Trade of the Week - NKE Vertical

The market has been range bound for the last few weeks with volatility on the decline, and earnings all over the place.  So where to go to look for a trade? Nike has already had Earnings and is near a low of the year, so seems like a good option.  As a contrarian that can mean only one thing to me: I have to make a trade with the assumption it will go up from here over the next 45ish days. We will do that by making a Long Call Vertical trade to bet that it starts to head up over the next couple months. For more on my trading and how to join me in real time, see below. Watch  the video  to get the details. Kal Trading Risk Disclaimer   All the information shared in this video is provided for educational purposes only. Any trades placed upon reliance of are taken at your own risk for your own account. Past performance is no guarantee. While there is great potential for reward trading stocks, commodities, options and forex, there is also substantial risk of loss. All tr

Mastering Flag Breakouts for Profitable Trading!

    "Flags" are one of the most common chart patterns. Also known as "consolidation" after the stock has moved up, Trading flag breakouts often provide favorable risk-reward ratios.  By defining specific entry and exit points, you can assess the potential profit relative to the risk taken. This risk-reward advantage enhances your overall profitability when trading flag breakouts, or flag break below. ⚐ Flag breakouts offer a well-defined pattern on the price chart. The consolidation phase forms a distinct flag shape, providing a visual cue  to anticipate a potential breakout. This clarity helps you to feel confident enough when to take the trade.  ⚐ Flag breakouts offer high probability setups: They occur within the context of an existing trend . The consolidation phase represents a temporary pause. Once the breakout occurs, it signifies a resumption of the original trend, leading to strong price movements.  By aligning  trades with the prevailing trend, you can

The Stock Market's Next Move: What Will Happen to Major Indices and Mega Caps?

Today we take a look at the major indices and some of the large caps (AAPL, AMZN, BA, DIS, META, MSFT, GOOG, TSLA, UBER). Watch the video to get the insight and what to expect moving forward. Good Trading! Trading Risk Disclaimer All the information shared is provided for educational purposes only. Any trades placed upon reliance of SharperTrades, LLC are taken at your own risk for your own account. Past performance is no guarantee. While there is great potential for reward trading stocks, cryptos, commodities, options, forex and other trading securities, there is also substantial risk of loss. All trading operations involve high risks of losing your entire investment. You must therefore decide your own suitability to trade. Trading results can never be guaranteed. SharperTrades, LLC is not registered as an investment adviser with any federal or state regulatory agency. This is not an offer to buy or sell stocks, cryptos, forex, futures, options, commodity interests or any other tradi