When prices break through a predetermined level of support or resistance usually coming out of a consolidation or congestion period

Sometimes prices vary within a range such as channels, or a formation such as triangles. A breakout occurs when prices are no longer contained in a range or formation. As you can tell from the chart below, prices moved within a trading range or channel for few months before breaking out over the resistance level.

A breakout is often observed with an anticipation of a throwback or pullback. Without a move to confirm the breakout can sustain, it is referred to as a “naked breakout”.


A breakout from a flag pattern
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Breakout
A breakout of a period of consolidation suggests that the market has. The example above shows a strong breakout as well as a pullback after the breakout, which led to further continuation of the bearish attempt. It is important to assess the strength of the breakout.