Breakouts in stock market

There are lots of traders in stock market who are waiting for breakout to be happening.  Breakout occurs when any stock make new high or reaches to the previous resistance level or break the trend line. Breakout in scrip could happen for 5 min or even years. E.g. if stock is trading in range bound condition few months and all of sudden stock is trading above the range bound price, you can say it is breakout stock.

 

Generally breakout stocks are profitable because many traders likes to trade when stock is in break out condition. So many traders will try to buy that scrip. So that volume for that scrip will increase and demand for that stock will also increases. And that will bust the price higher for that stock. If the stock has been in range bound condition for a long period and makes breakout, this kind of breakouts are stronger and gives more profit.

While breakout patterns are profitable traders must aware of false breakouts, false breakouts happens when many traders are not ready to buy that stock. In short volume of stock during that breakout condition is very low. Sometimes breakout condition could be generated by market makers, so you must confirm volume of stock during the break out condition before you start your trading for that scrip.

Sometimes you can see breakouts in penny scrip; these penny breakouts are highly risky and can generate more profit in short time.     

    

There are many ways to find breakout conditions; trader can manually search for breakouts. You can use volume shocker to find breakout stocks, if the volume of stock is higher than 5day average volume. You can use gap up stock screener with higher volume. Gap up stock screener allows you to find gap up stocks. Even trader can use trend to find the breakout conditions.