Breakout/Breakdown

One of my favourite trading stratagies is trading breakouts/breakdowns out of triangle patterns and/or congestion/consolidation.

In fact some of the stocks I am considering at the moment are:

Reliance Ind, Dabur and Zenith Computers!

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Traderji

www.Traderji.com

What you are referring to is intra-day noise. This effects short term or intra-day traders. Mid to long term traders generally avoid this intra-day noise to ride the trends.

When you look at the performance of the stock market at the end of a trading day it can be hard to work out why shares have either risen or fallen in value.

Broadly speaking, share prices are influenced by news or information: new data on employment, manufacturing, directors’ dealings, political events or even the weather, all kinds of news can influence the way shares move.

The health of the economy has a fundamental influence on share prices because it is ultimately responsible for driving company profits. Broadly speaking, if the economy is growing, company profits improve and shares will become more highly valued. If the economy is weakening, company profits will fall and share prices will go down.

Investors look at a vast amount of data to try and work out what is going to happen to the economy and shift their portfolios before the events occur. This is why you will often see markets move well ahead of an actual event occurring. You may, for example, get little reaction from the stock market when interest rates rise. This is because investors have already anticipated the shift months in advance and adjusted their portfolios beforehand.

You can usually assume that the stock market will anticipate moves in the economy by around six to nine months. So if you want to stay ahead of the game you will need to follow price data as closely as the professionals.

Investor sentiment can lead to irrational buying or selling of shares and result in bull and bear markets. A bull market is when share prices rise while a bear market is when they fall. In the technology boom of the late 1990s, for example, investors paid extremely high prices for shares and ignored traditional valuation measures, such as P/E ratios. This carried on until 2000 when investors belatedly realised these shares has risen too far and resulted in a three year bear market in shares.

__________________
Best Wishes!

Traderji

www.Traderji.com

Marcus

Here is a live example from NASDAQ of a breakout (7th feb) from a consolidation pattern (nearest to a Rounding Bottom ... sorry no pun intended)

Note how the 'gap up' which accompanied the breakout proved to be a good buy trigger.

Of course all this in hindsight.

AGILENT

Attached Images

MMUCELL Corp.gif (16.2 KB, 31 views)

somtime before breakout scrip move in narrow range with very less volume than break in either direction with greater volume

I think tea stock like Mcleod Russel, Harrison's etc and also Zenith Comp.are going through congestion mode. They'll break out soon.

LIC HOUSING - is it also a candidate??

Thanks to everyone for your views, it makes things a lot clearer for me


Agilent thanks for the chart its a very explicit example I do wish most breakouts are like that they would be easier to spot for the untrained eye or semitrained eye (like mine) I suppose.

One last thing "Gujarat industries power co ltd" is almost certain to either breakout or breakdown .... I think ..... I'm just not sure which it is could someone please have a look at the chart at www.nseindia.com and give me an opinion.

Many thanx

Looking more and more like a h&s pattern,I would go with Breakdown.A break and close below 64 is confirmation.Till then it 's nothing but a sideways pattern.

Like Agilent said many posts ago,we are talking about "usually".

Saint

Well thanks i was tempted to invest but WAS afraid it could go either way guess I'll wait a bit

Exactly as I said in the previous post, tea stocks have given a break out yesterday. Now, we may see the upper circuit today and the rally should continue for another 4 sessions.