Simple Technical Analysis

Trading on Breakout!

Trading on Breakouts! is a short term trading technique that is popular and is taught in Investment and Trading seminars and courses.

Currently there are 2 ways in which a breakout happens. It either breaks above the resistance level or breaks below the support levels.

Upon breaking out, traders may attempt to take long positions just above the current resistance level or short positions just below the support levels. For a breakout to be successful, it has to be accompanied by a big trading volume that is able to clear the support and resistance.

However there are many many instances of false Breakout and Breakdown causing traders to lose money. Technically, based on the trading volume and momentum, it can provide clues if the breakout and breakdown will be successful.

However, from what I have observed, Breakouts accompanied with strong fundamentals and good news will more likely to be sustainable. Breakdowns accompanied with bad news are more likely to break the support level. Leveraging on both Technical and Fundamental Analysis will be better.

What do you do when a false Breakout or Breakdown occurs?

Cutting losses and closing position will be the most practical action to be taken. Point of cutting losses is just below the Newly Formed Broken Support Level for a long position. For a short position, cut loss point is just above the Newly Formed Resistance Level.

Please see below Chart Extracted from Poems 2.0 for a Simple Illustration:

There are several attempts to break the $4.20 resistance from April till October 2021. The Sept 19-20thattempt was a false breakout.  However the breakout attempt on 11/11/2021 was successful with big volume. AEM did a Q3 Business Update Announcement on 10/11/2021 evening.

Please see announcement here from AEM.

https://links.sgx.com/FileOpen/Press%20Release%20for%203Q21%20Business%20Performance%20and%20Outlook%20.ashx?App=Announcement&FileID=690208

Moving Averages Crossover

Effective trading strategies can be found in bookshops, online sites and seminars.

One of the most simple, free and easy to use method to trade/invest that many traders and investors use is the Moving Averages Crossover. No purchase of software or system is needed.
All you need to have is a trading account with decent charting tools.

And if you have a Remisier or Trading Representative, he or she will be glad to assist you with any basic queries.
If you do not have a Remisier or is looking for a Remisier, you can contact me to open an account. Please click on the link http://lionelltp.blogspot.sg/p/account-opening.html

For Short Term trades, 20-Days Moving Average is plotted against 50-Days Moving Average. 50-Day Moving Average can be used as the Medium Term Supporting or Resistance Line.

200-Day Moving Average is used for Long Term Investors. A break below 200-Day Moving Average indicates a breakdown in a Bull Market.

My personal view is to keep your Trading Strategies Simple if you are not a full time trader or investor.

For Illustration purposes only, please click on the STI chart below for a better view.

Source: Chart Nexus dated 16/6/2016.  http://lionelltp.blogspot.sg/p/disclaimer.html

Please contact me at +65 90400848 or email me at lionellimtp@phillip.com.sg for Account Opening.

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