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Doubling Stocks Review: Is this a scam? If you are looking for the truth about doubling stocks this is a necessity. One always thought there was something wrong with a doubling of stocks.

Saturday, December 4, 2010

Breakout Trends

Upward and downward trendlines, or angledtrendlines, are not the
only way of finding the trend. Although they are the classic method,
there is a simpler way of identifying the trend that many think is more
practical for trading. It’s called breakout.
The start of a trend can be recognized by a price breakout. A breakout is sim-ply a new high price or new low price after a sideways pattern. The longer thesideways pattern, the more important is the breakout.
In Figure  we see a sideways pattern in General Electric (GE) fromNovember 1996 through April 1997. The breakout occurs near the end ofApril when prices move over the previous highs of $18. They move quicklyhigher before stabilizing.
Not all sideways breakouts are as clear as GE. The AOL chart in Figure  has three different sideways patterns, all overlapping. The shortest periodfrom October to November 1996 is broken by a sharply higher move thatbegins at $1.75 and ends at $2.80 in 7 days. A larger sideways pattern fromJuly to November 1996 is ended with the same breakout. Following thatmove, we see another sideways period from December 1996 ending at thebeginning of March 1997 with a break above $2.75.
Notice that the support line for the first two sideways patterns did notinclude the two lows in October. They can be considered false breakouts.When you ignore them, the support line for the sideways pattern is very clear.

Why Do Breakouts Look So Good?
A breakout is a sure sign that something has changed. If GE has been tradingbetween $45 and $55 for 3 months and then makes a new low, something haschanged. There are expectations of bad news.When you draw a classic upward trendline, as we did in Chapter 2, youare imposing the expectation that prices should continue higher at the same rate, or faster, in order to keep above the trendline. That may not berealistic.As long as prices go higher rather than lower, it doesn’t matter how long they take between new highs. By looking only at new highs and new lows, we can recognize the trend without placing as many conditions on price movement.