Breakouts are becoming increasingly popular in modern stock trading. The most successful of these is the base pattern breakout, which is seeing a surge in trading volume. This type of breakout implies a stock has gone through a steady process of rising over a period of time and has broken out of a support or resistance level compared to its recent highs and lows.
Base pattern breakouts can be an effective way to capitalize on short term price movements of a stock, and can bring either short-term profits or longer-term capital appreciation. They can also be seen as a signal to jump-start more enduring trends in a stock’s price.
Two examples of successful base pattern breakouts include the stock of Facebook (FB), which broke out from the base of its December 2020 trading range and has since gone on a meteoric climb. The second example is the stock of Microsoft (MSFT), which saw a breakout from the flat, base trading range in January 2021 after significant positive news, sending the price higher.
For those interested in pursuing base pattern breakouts as a means to profit from stock market movements, the key is to be aware of the support and resistance levels of a stock and pay close attention to price movements. It’s important to remember that breakouts can occur in both ways, meaning the stock can either surge higher or break down. Therefore, one should ensure they have conducted sufficient research to make informed decisions before making a trade.
