Breakout

A breakout occurs when the price of a security moves outside a defined support or resistance level with increased volume, signaling the potential start of a new trend. In technical analysis, breakouts are considered significant because they indicate a shift in market sentiment and can lead to substantial price movements. Traders often look for breakouts as opportunities to enter or exit positions, as they suggest the beginning of a new upward or downward trend.

Example

If a stock has been trading between $50 (resistance) and $45 (support) for several weeks, a breakout above $50 on strong volume might indicate the start of an upward trend, signaling a buying opportunity.