Breakouts/Breakdowns - How do U trade them?

H

hapaboy

I would like to start a thread discussing the breakout/breakdown strategy and how various INTRADAY traders trade these. Consider the following scenario:

Stock XYZ is a volatile stock that has had large (2-5) INTRADAY point swings over the past few days on over 100% increase in daily volume. It is now 10:00 am and it is making a new intraday high, do you:

A) Go long as soon as it breaks the high.

B) Wait for it to clear the high by a certain amount to confirm the breakout and then go long.

C) Wait for a pullback before going long.

D) Wait and try to go short (top pick).


Conversely, if the stock is making a new intraday low, do you:

A) Try to short it (normal way or, or, for you pro traders, put a bullet on it) as soon as it breaks the low.

B) Wait for it to clear the low by a certain amount to confirm the breakdown and then try to go short.

C) Wait for a pullback before going short.

D) Wait and try to go long (bottompick).

What other factors do you consider, if any, i.e. time of day, previous days' range, technical analysis, if it is listed (NYSE) or NASD, sector action, overall market conditions, etc?

I'd be very interested in hearing your responses as I have seen various posts on ET in which certain traders discuss bottompicking/toppicking, waiting for pullbacks, and that breakouts/breakdowns are a dead strategy in this market.
 
I would only play an intraday breakout if there as been adequate consolidation 5-10 min before break.

Some times a stock will make a run and break an established high but because the stock is overextended it creates a bull trap and tanks, let me know what you think about THAT!!:D
 
I'm soooooooooooooooooo happy that we're all brothers now. Hopefully that means none of you will take the other side of my trades? :)
 
hapaboy - not quite that simple usually.

Just breaking above an intraday high isn't necessarily enough of a reason to go long. Depends on what the overall support/resistance landscape looks like.

For instance, let's say that the first 30 minute intraday high is 40.60 BUT a key resistance level is sitting at 41. Just because the price eventually trades through 40.60 is NOT a good reason to immediately jump in and buy.

In fact, unless the overall market is ramping higher at the same time, jumping in and buying in this scenario could easily end up slamming into the resistance zone and rolling over.

If you have a real potential breakout (taking intraday resistance zones into consideration not just a new intraday high), you'll also want to try to confirm it with hopefully increasing volume and indications of buying (i.e., trades going off at the ask - not just temporarily higher prices going off at the bid which could indicate that people were selling into it which could end up negating the breakout).
 
Rollin' rollin' rollin' lets keep those doggies rollin'...

Rawhide!......


Oops. Sorry. Flashback to the fifties... Not that I was there.

:eek:
 
Man, I loved that show! Clint Eastwood was terrific in his role as Rowdy Yates, I believe....Not that I was around for the original airings either.....
 
I think I used to watch re-runs or something when I was a kid.
All I know is that darn song has been running around in my head
ever since...

:D
 
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