Breakouts are very popular in Trading but they are not as easy as they sound. They test patience of investors and traders and lots of times do drain out the weak hands before making a powerful journey.
Let me give you one example:
LIC Housing Finance Weekly Chart
As you can see in the weekly chart above - LIC Housing Finance broke out above 295 on weekly chart in the week of May 16 2014. Post breakout it pulled back to 295 and just when it looked like a buy - the stock dipped below 295 to below 280. It did create nervousness and lots of stop losses got hit. The weak hands got drained out of the stock and see what happened next. The stock climbed back above 295 and then over next six months climbed more than 60%.
In Bull market - once you identify a strong breakout stock then be careful of hitting stop loss just on minor dips below support. The chances are that move is just to throw you out of strong stock before making a strong upward move. Do not be stop loss trigger happy in Bull market. Having said that - monitor risk and don't totally get stuck to a bad position either.
Disclaimer – The state of the market notes is Deepak’s perspective on the market. The column is purely for educational purpose. Nothing contained herein is a solicitation to trade or a recommendation of a specific trade. By reading this publication you agree to make no trade relying in whole or in part on the comments of the writers