What Are Breakout Stocks?

What are breakout stocks, and how can you determine which stocks are going to change their patterns? In the stock market trading game most investors set support and resistance levels to help minimize the risks of losses. Stock market basics show that most stocks do not go above the historical resistance levels, but sometimes this does happen. When a stock goes above the resistance level price it is considered to be breaking out of the typical pattern. Breakout stocks can be a dream come true for traders who hold on but many traders sell the stock when it gets near the resistance level, losing out on the increases seen. Careful analysis and evaluation can help you determine whether a stock is going to break out or go back down in price once it nears the traditional resistance level.

Breakout stocks are those which experience unusual increases beyond the usual high price for the specific stock being traded. Many traders use stock chart patterns to find stocks which may do this, and when it happens the smart investor who goes along for the ride may end up making a substantial return. Breakout stocks do make some investors and traders nervous though, because if it is going up erratically then the chances are good it will fall eventually. Ideally investors will hold on as long as possible during the upward trend, selling only when it is believed that the stock will start to fall soon. Stocks which break out can surprise even the most experienced trader, and predicting these moves is very difficult.

The information supplied in this article is not to be considered as medical advice and is for educational purposes only.