The Breakout Play – or is it?

A common trade setup for most traders is the “Breakout” play. A stock has a price that is approaching a key resistance level and a lot of traders look for continuation – if volume is supporting the move.

What happens when a roadblock(s) appears though? I bring you the Daily chart of $EPD (Enterprise Products):

RSI is drifting in to the over-bought area and has potential to spoil the party. With that in mind, what else do you see that gives an edge – either to the Bears or the Bulls?

I see the slightly declining volume as price moved up to test the resistance line. The higher probability will come from one of the below:

  • The stock will “rest” and work of the over-bought condition
  • Breakout players show up to play a break of resistance
  • Sellers look at the roadblocks and sell here

As @daytrend often says, your money, you decide.

One thought on “The Breakout Play – or is it?

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