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Technical analysis

Breakout

A move through an established level or range, taken as a signal that a new trend may be starting.

A breakout happens when price clears a level that has held repeatedly. The logic is that the orders defending the level have been consumed, leaving nothing immediately above to slow the advance.

Volume is what separates a real breakout from a false one. A break on volume well above average reflects genuine repositioning; a break on thin volume is much more likely to reverse, trapping the traders who chased it.

False breakouts are common enough to be traded deliberately. Price pushes just beyond a well-watched level, triggers the stop orders resting there, and immediately returns into the range. Waiting for a close beyond the level, or for a successful retest, filters many of these out at the cost of a worse entry price.

Also known as: breakdown · false breakout · range break

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Educational definition. It is not investment advice and not a recommendation about any particular instrument.