Multi Day Stock Breakout

Here's a great multi day stock breakout that occurred recently. This is a good example to use as a reference for future setups on stocks you may have on a watchlist.

The stock chart I have below is for a 5 day period using 5 minute bars.

After testing the $10.20 price level several times the first two days and failing, prices broke out up through this level at the opening of the third day on strong volume.

Once the breakout occurred, volume remained high and prices stayed above the previous resistance level of $10.20. This showed the first sign of strength and the possibility of a further move to the upside.

Multi Day Stock Breakout

The next signs of strength occurred on the third day as well. Prices moved up and tested the $11.00 level twice, failing both times, but remaining well above the previous highs of $10.20.

During the end of the third day, prices made a large advance on the strongest volume of the day over consecutive bars.

On the fourth day on the chart, prices opened up near the previous day's closing high, and began to decline. After the previous day's 18+% move higher, a pullback of some sort would not necessarily be negative for a stock.

As you can see in this case, prices pulled back and declined, but they held at the previous day's resistance level of $11.00, which was now providing support. Another sign of strength.

Towards the end of the fourth day, prices made a similar strong upward adavance on increased volume just as on the thrid day. Another sign of potential strength.

Moving ahead to the last day, prices opened up and immediately started moving higher, with no considerable pullback this time. Prices moved higher by about another 9% or so this final day.

Notice that towards the end of the multi day stock breakout, there was no strong finish as in the two previous days. The chart is displaying a lack of additional buyers as compared to other days shown.

So how can we use this multi day stock breakout as a setup for ptential future trades?

Several ways. First: if you came across this, or a future stock after the first breakout day, you could watch the price action the following day on a stock chart. Using this as an example, if prices hold the previous day's resistance level, or close to it, as a new support level, this would signal strength.

An intraday entry point would possibly be sometime in the afternoon as prices rose higher off the support level. This would show strength going into the afternoon, as compared to prices declining in the afternoon, signaling weakness.

Second: As prices broke out higher towards the end of the day, above the price level that held for most of the day as resistance (in this case $11.20ish), another intraday entry signal is given.

Finally, on the fifth day as prices broke out above the previous day's high, another intraday entry signal is given.

These examples and illustration relates to short term intraday or multi day trading such as 2-3 days maximum, not longer term swing trading.




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