Page 300 - THE MARKET WHISPERER

29 6 PART 10 - Winning Trades
Intraday Breakout, PCAR

In the image above, we see that PCAR begins the day’s trading at
$46.40, rises, encounters resistance at $47.5, and consolidates [1] beneath
the upper price range until the breakout [2]. The interesting point in this
breakout is the fact that the volume did not increase. The reason is simple:
notice the time that the breakout occurred. It was at the start of the lunch
hour break, when most market players (usually the institutional traders)
have gone out to eat.

Why Do Breakouts Occur?
Breakouts occur when there are more buyers than sellers and the price
breaks over resistance. Naturally, our purchase point will be one cent
above the line of resistance. We can imagine a breakout as a large quantity
of water held back by a long dam. The dam wall is the line of resistance.
What happens if and when the dam wall breaks? Obviously, not only you
and I know the answer to that. A large number of buyers are waiting for
the breakout, and many others with less experience will join the move at
later stages, fueling it a little further. To a great degree, breakouts above
resistance are self-fulfilling prophecies.

Most Breakouts Fail
A breach of the dam will certainly lead to flooding. Unlike the dam, a
breakout from a technical formation does not always succeed. Statistically,
no less than 80% of breakouts fail!