A breakout occurs when price moves decisively beyond a previously established support or resistance boundary, often signaling that the balance of supply and demand has shifted. Volume is the most important confirmation factor — a breakout on heavy volume suggests genuine conviction from buyers or sellers, while a breakout on light volume may be a false move that reverses quickly. Common breakout setups include breaks above multi-week consolidation ranges, above prior swing highs, or above descending trendlines. Failure breakouts, where price pierces a level then reverses back inside, are common and often become powerful signals in the opposite direction. Retest behavior after a breakout — where price pulls back to test the broken level as new support or resistance — offers a lower-risk entry opportunity for traders who missed the initial move.
