Breakout (and Breakdown)

A breakout occurs when price decisively moves above a resistance level (see Kaavon's "Support and Resistance" glossary definition), often interpreted as a signal that buying pressure has overwhelmed the level that previously capped price, potentially opening the way for a continued upward move. A breakdown is the mirror case: a decisive move below a support level, interpreted as a signal that selling pressure has overwhelmed the level that previously held price up.

Traders commonly look for confirming volume alongside a breakout or breakdown, since a move through a key level on unusually heavy volume is generally considered more credible than the same move on thin, unconvincing volume. A false breakout, sometimes called a "fakeout," occurs when price briefly moves past a level before quickly reversing back, trapping traders who entered expecting the move to continue — this is a well-known risk that leads many traders to wait for some confirmation before acting on an apparent breakout.