Notes on identifying breakout

As I’ve dug more into technical analysis, it seems a style that I am gravitating toward is just buying one big wave up, then staying put on those sideway moves and wait for the next breakout.

To succeed with this strategy I think there are 4 things that need to be mastered …

  1. Identifying a true breakout
  2. Not getting into false breakout
  3. Knowing when to get out when the trend is over
  4. Knowing when to keep going during a small pullback

Signs to distinguish between true/false breakouts (1,2)

MACD – it should be in the green when breakout is happening

Volume profile – it should be light on the selling and high on the buying during consolidation for a real breakout

Topping Tails – it shouldn’t topped the resistance too many times during consolidation

Signs to distinguish between minor pullbacks and end of a trend (3,4)

MACD – If it’s red it’s likely over. If it’s green it’s likely it might be a minor pullback but need to watch close.

Volume profile – light on the selling and high on the buying for minor pullbacks; high on selling and light on buying for trend end

EMA9 – if it crossed over it’s very likely it’s over.

SMA5 – should use SMA5?

Leave a Reply

Your email address will not be published. Required fields are marked *