How to trade a temporary pullback and a breakout gap?

How to trade a temporary pullback and a breakout gap?

Some security will make a temporary pullback before making a new high with a breakout gap.

How to trade a temporary pullback?
A trader may be bearish during the temporary pullback formation. A trader may consider going short during this pattern formation or the trader may consider waiting to avoid losses during the price drop.

How to trade a breakout gap?
A trader may be bullish when a bottom is identified. A trader may consider accumulating shares in anticipation of a breakout.

What are some of the reasons one may fail to trade this pattern?
Correct identification of the chart pattern is essential to trade this pattern. Not all stocks will pullback before a breakout to a new high. Possibly misidentification of a trend change as a pullback. Possibly a temporary bottom was identified, but the downtrend continued and changed the pattern.


Thank you for reading!

Greenfield














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Disclosure: Article written by Greenfield. A market idea by Greenfield Analysis LLC for educational material only.