Analysts are classified into two: Fundamental traders and technical traders. breakout is one of the essential tools for technical traders. Once the price range starts to contraction it has to break the previous high or low and help traders to make a trade decision whether to buy or sell.
To create a , an analyst must have at least two points on a price chart; the time frame must differ from individuals.
If company X is trading at $35 and moves to $40 in two days and $45 in three days, the analyst has three points to plot on a chart, starting at $35, then moving to $40, and then moving to $45. If the analyst draws a line between all three price points, they have an upward trend. The drawn has a positive slope and is, therefore, telling the analyst to buy in the direction of the trend. If company A's price goes from $35 to $25, however, the has a negative slope and the analyst should sell in the direction of the trend.
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