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Breakout

A move through a support or resistance level or out of a range, ideally with volume behind it.

Breakout and retestPrice stalls under one level, pushes above it, comes back to touch it from above, then continues higher.pricetimeold resistancenow support1price keeps stalling2breaks above3pulls back and retests it4and carries on
Breakout and retest. Price stalls under the same level several times, pushes above it, then drops back to touch it from above before carrying on. That touch is the retest, where the old ceiling is tried as a floor. A break that falls straight back under it is a false breakout.

A breakout happens when price leaves a range or clears a resistance level (or support, sometimes called a breakdown). Good breakouts come with rising relative-volume and follow-through; bad ones reverse quickly into a fakeout.

Traders enter either on the break with a stop-order or on the retest of the broken level. Both approaches have tradeoffs: the first gets more fakeouts, the second misses runners.

Example: a stock has traded $48 to $50 for three weeks. It closes at $50.80 on 3x average volume. Entry $50.85, stop $49.60 back inside the range, target $54 (2x the range height).

Related: range, resistance, fakeout, retest, relative-volume

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