Breakout / Breakdown
Breakout markets or breakout stocks start or continue a bullish trend. A breakout typically indicates that buyers take control after a couple of attempts to break out to the upside of a price point that got tested several times.
A breakout is a chart based pattern. A breakout stock or breakout market has a chart setup that is in the making for a while (months or years or even decades) after which it breaks out of the dominant pattern. A breakout always refers to the upside.
There are several breakout patterns. The ones that we focus on are (1) a triangle breakout pattern (2) a multiple top that gets broken to the upside (3) a rounding bottom that breaks out after a consolidation at the lows.
One great example of each breakout pattern (1) this is a triangle breakout by Kush Bottles (2) this is a multi-top breakout from Nike (3) this is an amazing case of a rounding bottom breakout from Pandora Media.
Note that each of these cases were forecasted by InvestingHaven before the breakout took place. That’s the power of forecasting based on the chart, first and foremost breakout markets or breakout stocks. Hence, our mantra ‘start with the chart’.
However, a false breakout is always possible, so investors should be wary about a false breakout.
Breakdown markets or stocks are the opposite. After a breakdown they start falling off a cliff, there is lots of power to the downside because sellers take control.
Here as well never rule out a false breakdown. Once a false breakdown occurs the stock or market gets back in its previous pattern only to resume its previous trend. Sellers lost control in such a case.