Breakout and breakdown
Also known as: breakout, breakdown
A breakout is when a 's price moves decisively above resistance, and a breakdown is when it moves decisively below support. A is a price the had previously struggled to clear, and a is one it had previously held above. Both terms describe a leaving an established rather than continuing to bounce within it.
Volume is usually treated as the key ingredient that separates a meaningful breakout or breakdown from a temporary blip. A move above resistance on light is often viewed with suspicion, since it may simply reverse back into the prior range once the initial push fades. A move on volume well above the 's average is read as a stronger signal, suggesting real buying or selling conviction is behind the move rather than a handful of trades pushing price around in thin conditions.
Traders who follow breakouts and breakdowns as a strategy typically buy once price clears resistance, on the idea that a level that once capped the price can flip into support once cleared, and sell or short once price breaks support, on the same logic in reverse. The main risk with this approach is the , where price pokes through the level and then quickly reverses back inside the old range, trapping traders who entered expecting the move to continue.