Study Guide for the Second Edition of Technical Analysis: The Complete Resource for Financial Market Technicians

Chapter 13. Breakouts, Stops, and Retracements

Chapter Objectives

By the end of this chapter, you should

• Understand what a breakout is

• Be familiar with the major methods of identifying a breakout

• Be familiar with the purpose of entry and exit stops

• Be familiar with the major methods of setting entry and exit stops

Chapter Summary

Breakouts

A breakout occurs when a price breaks through a support or resistance level or through a trend line. After the support level, resistance level, or trend line has been penetrated, the breakout must be confirmed to make sure a false breakout hasn’t occurred. One way to confirm a breakout is to wait until the price closes beyond the penetration point. Another confirmation method is to establish a breakout ...