There are many techniques to find good potential stocks for Day Trading | Stock trading | breakout investment | trend trading | investing | long term investing in stock market. In this section I show you how to Picks Breakout Stock for Stock trading, Day Trading, Stock Investing or swing trading in stock market .

In present stock market for successful trading and smart investing you need to know advance technical analysis system | techniques, Breakouts are one of the most common and widely use technique to find out stock to play for in stock market. but you must be selective in choosing them.

What are Breakout stocks?

Technical analyst considering breakout stocks which are go through its strong Resistance or strong Support is a Breakout stock. Here big question is How you know strong Resistance or strong Support for stock, and it’s a right breakout or wrong breakout.

You can identify strong support or resistance by using different techniques that I show you latter on. But simple techniques to identify resistance or support you can consider nearest high picks or low picks of the stock price and when stock price cross above this picks or below this picks analyst considering as a breakout of the particular stock.

You can identify stock given a right breakout or wrong breakout by using different technical indicator analysis and identifying its trend and momentum. Once you know that you can ride on breakout stock.

Down side (Bearish) Breakout of stock price can also be potentially good rewarding choice for Day Trading | Stock trading | investing in stock market. If you have any question related your Breakout stocks Picks send me feedback.

Does it ok to invest in Breakout stocks?

Properly identified breakout stocks may offer good return on investing within short time frame like one to seven trading sessions. It’s a good choice for Trading.

It is not advisable to place all eggs in one basket because in case your decision goes wrong you can loose all so to control risk factor it is advisable to diversify portfolio. Before to consider breakout stock to play in stock market. it is very important to know why suddenly demand increase or supply increase. Here are some Reasons for Breakouts

Reasons for stocks to Breakout

To select Breakout stocks for investing or Day Trading you need to check some basic like:

• Surprise Quarterly result
• Company declare upside revision for earning expectation
• New development
• New management
• New product
• Stocks making new highs often get noticed by media
• Industry pressures due to some related events
• Acquisition interest from some good company

Potential Entry Points for Breakout Stocks Plays | investing | Trading

Before choosing a Breakout stocks to play make sure that the stock continues its upward (or downward for the bearish play) trend in the next trading session, also check short term moving average is moving toward the breakout direction to identify its trend and Rate Of Change of Price (ROC) or Average Directional Movement Index (ADX) to identify its momentum or you can use your favorites indicator to find out momentum of the breakout stock. If stock gives up side breakout we need short term moving average also moving in up side and for down side breakout we need short term moving average moving in down side.

Above I plot a chart for Google stock from Feb 2007 to Oct 2007 with 50 Days Simple moving Average. As per chart Google stock had given a breakout on April 3rd with good volume. But with this breakout there was stochastic in overbought territory and 50 day moving average moving in down trend, that indicating its not right time to buy but in May 2007 it come back to retest breakout point and this time stochastic given a buy signal with up trend 50 Day moving average. This is a right buying point. I marked with up Arrow. Applying this rule you can buy | invest in any stock. This is a key for breakout stock play. Instead of STO you can use Rate of Change of price (ROC). Average Directional Movement Index (ADX) or any your favorite technical indicator to confirm breakout it’s a real or trap.

Overall market conditions play an important part in determining the significance of a Breakout stock play. A stock breaking out in an up market that more likely to go upward and make a new high. A stock breaking out in a down market may struggle to go more up but a stock that does continue on, in down trending markets may explode upward when the down stock market turns around.

This breakout theory is valid to do analysis of Index, Penny stocks, ETF or Futures. Using this breakout theory with Index you can invest in 401k, IRA plan or any retirement plan. To move money from high risk fund to low risk fund follow exit theory. Breakout theory gives better result if you do research before to do any investment.

Potential Exit Points for Breakout Stocks Plays | investing | Trading

Your exit point depends on your risk tolerance. You may want to consider a trailing stop loss as your exit strategy. you may want to start with a stop loss at some level below the previous days low and move it up if the stock moves up.

Above I plot a chart for Google from May 2008 to Sep 2008 with 50 Days Simple moving Average. As per chart Google stock had given a down side breakout on Jun 26th with good volume. But with this breakout there was stochastic in oversold territory and 50 day moving average moving in up direction, that indicating its not right time to short sell but in July 2008 it come back to retest breakout point and this time stochastic given a Sell signal with down trend 50 Day moving average. This is a right short sell entry point. I marked with down Arrow. Applying this rule you can book profit | exit on invest | short sell any stock for Day Trading | swing trading | Stock trading | investing.

With Breakouts, one of the best exit strategies is a closer pivot point, you can consider Fibonacci number and also watch for 50MA, 100MA, 200MA.

Volume/Price Moves:

Only the stock choose those breakouts with high volume (at least 250%) and that finished the day, near the top of their trading range for the day. Volume is a important factor to consider Breakout stock for day trading | Stock trading | investing in stock market

Some stocks taking rest for some days, once they hit the initial Breakout point before they continue to climb upward | downward.

Stop loss:

set a stop loss some level below the Breakout days low

It’s a good idea to use some another technical indicator like: On Balance Volume (OBV) | Percentage Price Oscillators (PPO) | Relative Strength Index (RSI) | Stochastic Oscillator (STO) | Commodity Channel Index (CCI) | Chalking Money Flow oscillator (CMF). | Rate Of Change (ROC) | Average Directional Movement Index (ADX) with Moving Average (MA) to know stock market in oversold or overbought condition. When we use two or three technical indicators and in case of positive divergence and negative divergence it giving real good result, only you need to change time span and find out which is a better pair for you.

Top Story:- Breakout stocks investing

Penny Stocks | Trading | stock market | stock trading | day trading | investing

Risk in Breakout stocks investing | Trading

While all investing involve risk, microcap | penny stocks are among the most risky. Many penny stocks companies tend to be new and have no proven track record. Some of these companies have no assets or operations. Others have products and services that are still in development or have yet to be tested in the market. Consider plays on only the best Breakout candidates. Many Breakout stocks just peak through the new high or point of resistance and head back down.