A breakout in technical analysis (TA) is when the price of an asset moves above or below a resistance or support level. A breakout may signal that the asset’s price will begin to move according to the breakout direction.
Prices in the crypto and stock markets fluctuate significantly, but they usually stay within a specific range. The upper range is known as the resistance level, while the lower range is known as the support level. It is known as a breakout when the price moves outside of either the resistance or support level.
When it crosses the resistance level, it is a bullish trend. And when it crosses the support level, it is a bearish trend. The analysis helps traders and investors take a position concerning the market conditions.
Breakout can be used in almost any timeframe or trading strategy. Depending on the direction of the move, a breakout can be used as a buy or sell signal. Once the price has gone outside the established support or resistance range, a breakout trader can take a long or short position.
