Breakout/Breakdown

[marcus]

If a scrip price is fluctuating in a tight range for a while how can we predict whether it will breakout and go up or breakdown and go down?

Thanx

 

[vince]

No one can predict a damn thing. Wait for it to happen and go with the move.

 

[Agilent]

No one can predict a damn thing. Wait for it to happen and go with the move.

Not quite Vince...for example...

A congestion in an ascending right angled triangle (signifying a prolonged supply at a constant resistance level) is usually followed by an UP breakout (when the supply runs out and demand persists)

Likewise, a congestion in a descending right angled triangle (signifying prolonged support at a constant level, if it gives way) is usually followed by a DOWN Breakout

These breakouts can be significant, in terms of subsequent 'moves', if also accompanied by Gaps

There are numerous examples of these concepts in any standard old school book on TA, e.g Edwards and Magee

AGILENT

 

[vince]

As you said Agilent Usually not necessarily. There are umpteen examples of failed patterns. They only give you a probable idea of price movement nothing else, the rest depends on trade and money management strategy.

 

[Agilent]

Usually means : say 7 or 8 cases out of 10.

The fact that such patterns do NOT behave (as predicted) 10 out of 10 cases does NOT mean we should ignore them as worthless.

If that were to be, then theories based on empirical research in any discipline (e.g recommended treatment of asthma based on 'usual' outcomes in past cases) will need to to be thrown out of window.

Trust you get my point , Vince

Marcus : In any chart, volumes play a v important role... : a downside breakout ( not called breakdown by the way) acccompanied by heavy volume, for instance is a very bearish trigger, usually.

AGILENT

 

[marcus]

Usually is good enough for me, thanks Agilent guess I'll buy the book for the exmples "TA of stock trends" which you mentioned. Hope its good for beginers.

 

[Agilent]

Usually is good enough for me, thanks Agilent guess I'll buy the book for the exmples "TA of stock trends" which you mentioned. Hope its good for beginers.

Yes it is .. in fact, many traditionalists consider it the Bible of TA ... I keep my copy under lock and key (haha ... jus' kiddin')

all the best

AGILENT

 

[Saint]

Marcus : In any chart, volumes play a v important role... : a downside breakout ( not called breakdown by the way) acccompanied by heavy volume, for instance is a very bearish trigger, usually.

AGILENT

Hi Agilent,

Interesting discussion,......just wanted to make a mini clarification.That which is important is the fact in itself,and not the word that describes it.Yet words are very necessary to describe any event.

The word breakdown is used by many TA experts including Magee in his other book "The Magee System of TA".Really doesn't matter whether somebody calls it downside breakout or breakdown.......make your profits off the breakdown that you correctly spotted.

But great discussion all the same.

Saint

 

[Saint]

Actually both Vince and Agilent are going to make profits.......Agilent knows the type of patterns that usually breaks out,and enters a trade with a stop just in case we have a failed pattern here.If this indeed was a failed pattern, he'd probably be stopped out,and might reverse his trade.

Vince is a trend trader,he's going to wait for a trend to form,and he's going to latch on to it,and make his profits.

Both slightly different in their approaches,but are going to rake in the moolah all the same.

Great going both!

Saint

 

[Agilent]

Actually both Vince and Agilent are going to make profits.......Agilent knows the type of patterns that usually breaks out,and enters a trade with a stop just in case we have a failed pattern here.If this indeed was a failed pattern, he'd probably be stopped out,and might reverse his trade.

Vince is a trend trader,he's going to wait for a trend to form,and he's going to latch on to it,and make his profits.

Both slightly different in their approaches,but are going to rake in the moolah all the same.

Great going both!

Saint

Saint
Thanks for yr comments

Let me add : I also look at fundamentals, e.g. current working etc

Had spotted one scrip long time back ( see chart .. Clutch Auto ) thru 52 week highs ... also happened to be soon after a breakout ...got in at 24 , but sold prematurely, in 30s.

How much is it now ? 3 guesses ...

Vince would have probably milked it longer ( am I right Vince ?) since he is better at understanding momentum

Marcus, your original innocent sounding query, in my view, is at the core of dozens of profitable opportunities. But believe me, it takes lots of patience to spot such sparks , but even more skill to make lots of money from them

Do not hesitate to share such interesting looking charts on this forum. Its a great learning platform

AGILENT