Stock Trading Tips — 3 Types of Breakout Price Bars
There are lots of stock trading tips but few that can help you become a better trader. However, one tip can help you which is learning how to spot breakout moves as they begin.
I’m sure you’re aware that breakout moves can lead to huge gains. But, you’re also aware that timing an entry is tricky.
That’s because not all breakout moves are created equal.
There are many false breakouts that give the appearance of getting ready to take off but then fail to follow through.
For you, this can be incredibly frustrating and demoralizing. Suffering through a series of these kind of false breakouts leads to mounting losses. These losses chip away at both your capital and your confidence.
But, there is one price pattern that can help you avoid false breakouts while increasing your odds of success.
A Price Thrust Breakout Bar is a powerful pattern that breaks out through resistance or support.
They can signal powerful moves just just before a stock explodes into a price trend.
This is critical if you want to latch onto an early trend just as momentum is starting. Like a rocket during blastoff, there is a large amount of energy exerted to gain early momentum. Just at the tipping point, the craft gains speed and breaks free of the Earth’s gravity. The Thrust Breakout helps you latch onto price’s “liftoff” and profit.
There are 3 types of Thrust Breakout Bars you want to master:
1) Thrust Breakout
2) A Breakaway Lap
3) A Breakaway Gap
This type price bar is 2 to 3 times the average price range of the last 20 days.
Also, it trades on greater volume than the previous trading session and closes at the top/bottom. Also, a Thrust Breakout closes at the top 1/3rd or bottom 1/3rd of its price range.
To make it simple, any time you see a large price bar closing at the top or bottom of its price range on higher volume then there’s a good chance that you’re looking at a Thrust Breakout Bar.
The Breakaway Lap is a version of the Thrust Breakout that shares the same traits but has a “hole” in it.
This hole appears between the previous day’s close and the next day’s price open, but less than the previous days’ high/low.
There are two types of Breaklap Price Bars:
1) Breakaway Lap Up Price Bars
2) Breakaway Lap Down Price Bars
For a Breakaway Lap Up bar, look for a breakout above an underlying security’s price resistance where the low of that trading day is higher than the previous trading day’s close, but less than the previous day’s high.
This is where the “hole” is between the two trading days and reveals a lap formation.
A Breaklap Down bar forms when price breakouts below support and where the low of the day is lower than the close of the previous day, but higher than the previous low.
Same as above, this is where the “hole exists which is a hallmark of a lap pattern.
Breakaway Gaps are cousins of the Thrust Breakout. They share the same characteristics but open/close outside the previous trading day’s intraday range.
They are strong indicators of a powerful move.
Again, there are two types of Breakaway Gaps that you need to master:
1) Breakaway Up Gaps
2) Breakaway Down Gaps
Breakaway Up Gaps are bullish price patterns. Price opens above the high of the previous trading day’s intraday price high.
Breakaway Down Gaps are bearish price patterns. Price opens below the previous trading day’s intraday price low.
One More Thing
These price patterns have proven reliable entry methods and indicators of trend strength.
When a stock is gathering strength you can look for these price bars inside the stock’s price action. If many of these types bar forming in the direction of the trend it can reveal that a runaway move is about to take place.
This can give you an edge to step in from of the move for huge gains.
Knowing how to spot and trade Price Surge Breakout Bars can improve your winning percentage and average profit per trade.
In fact, there are many price patterns that can help you win in the stock market especially when used together.