Breaks ??

Markets spend more time in trading ranges than they do in trends. Most breakouts from trading ranges are false breakouts. They suck in trend-followers just before prices return into the trading range. A false breakout is the bane of amateurs, but professional traders love them. Professionals expect prices to fluctuate without going very far most of the time. They wait until an upside breakout stops reaching new highs or a downside breakout stops making new lows. Then they pounce - they fade the breakout (trade against it) and place a protective stop at the latest extreme point. It is a very tight stop, and their risk is low, while there is a big profit potential from a pullback into the congestion zone. The risk reward ratio is so good that professionals can afford to be wrong half the time and still come out ahead of the game. The best time to buy an upside breakout on a daily chart is when your analysis of the weekly chart suggests that a new uptrend is developing. True breakouts are confirmed by heavy volume, while false breakouts tend to have light volume. True breakouts are confirmed when technical indicators reach new extreme highs or lows in the direction of the trend, while false breakouts are often marked by divergences between prices and indicators.