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BREAKOUTS


Breakouts

05/12/00 01:36:01 PM
by Jayanthi Gopalakrishnan

Catching a stock that is breaking out of its trading range during the early stage can result in a profitable trade.

Security:   KO
Position:   Buy

In the accompanying chart, Coca-Cola Co. (KO) showed evidence that it was breaking out of the trading range that it had been in since mid-March. The price gapped up at the open and closed at the high of its trading range. Note the increase in trading volume.

There are occasions when such a scenario may prove to be a false breakout, and you can see that a similar breakout occurred on 4/4/00 but quickly retreated back into its trading range.

In order to determine if the activity on 5/9/00 is the beginning of a breakout, you'll have to watch the activity on the following day. On 5/10/00 prices did continue their upward movement and stayed above the trading range accompanied by higher-than-average volume. Additionally, the faster moving average had crossed above the slower moving average, another confirming signal.

Graphic provided by: CQG Net.
 



Jayanthi Gopalakrishnan


Title: Editor
Company: Technical Analysis of Stocks & Commodities
Address: 4757 California Ave SW
Seattle, WA 98116
Website: Traders.com
E-mail address: Jayanthi@traders.com

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Date: / /Rank: 4Comment: Chart resolution seems to be a problem. I have to sort of pretend to see the moving average lines.
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