Stock To Pick

How to trade a BreakOut/BreakDown stocks?

In-order to trade a breakout/breakdown stocks, the initial steps would be identifying the stocks which can be expected to breakout or breakdown. This site provides an ability to run through 1000+ of stocks on daily basis and identifies a stock which can enter into support or resistance level for near breakout/breakdown can happen in weeks to months time line.
The website runs through algorithm of identifying ascending/descending triangle patterns and based on the pattern it identifies the target price where it can reach. When trading breakouts/breakdown, it is important to consider the underlying stock's support and resistance levels. The more times a stock price has touched these areas, the more valid these levels are and the more important they become. At the same time, the longer these support and resistance levels have been in play, the better the outcome when the stock price finally breaks out.

Entry Point

After finding a good instrument to trade, it is time to plan the trade. The easiest consideration is the entry point. Entry points are fairly black and white when it comes to establishing positions on a breakout. Once prices are set to close above a resistance level, an investor will establish a bullish position. When prices are set to close below a support level, an investor will take on a bearish position. To determine the difference between a breakout and a fakeout, wait for confirmation. For example, fake-outs occur when prices open beyond a support or resistance level, but by the end of the day, they wind up moving back within a prior trading range. If an investor acts too quickly or without confirmation, there is no guarantee that prices will continue into new territory. Many investors look for above-average volume as confirmation or wait toward the close of a trading period to determine whether prices will sustain the levels they've broken out of.

Exit Point

When planning target prices, look at the stock's recent behaviour to determine a reasonable objective. When trading price patterns, it is easy to use the recent price action to establish a price target. It is important to know when a trade has failed. Breakout trading offers this insight in a fairly clear manner. After a breakout, old resistance levels should act as new support and old support levels should act as new resistance. This is an important consideration because it is an objective way to determine when a trade has failed and an easy way to determine where to set your stop-loss order. After a position has been taken, use the old support or resistance level as a line in the sand to close out a losing trade.