A breakout is a technical pattern that forms on a chart when the price of an asset moves above a resistance level or below a support level.
Understanding the Term
In technical analysis (TA), a breakout denotes when the movement of the price of a certain asset changes. It usually signals the potential for the price to start trending in the breakout direction.
When a breakout is accompanied by high trading volume, it signifies a higher chance the asset will continue trending in the same direction, as opposed to a breakout with low trading volume.
Sometimes, a price of break occurs outside of a defined range but quickly recedes back into range and is then referred to as a false break or fakeout.
Breakouts are typically preceded by a period of decreased volatility.