Breakout with Candlestick signal
Breakouts provide traders with a high probability scenario to take advantage of. Traders should definitely take notice If the breakouts occur with a candlestick signal.
Notice the chart of DCB below. The stock kept using the 50sma as support in August/September.Then on 23rd September, the bulls took control with a huge Bullish Engulfing signal. The candle formation with exploding volume on that day indicated a lot of money pouring in the stock. Clearly this was a situation to go long on confirmation.
Think of it as a coiled spring exploding..in this case the downtrend line and the 50sma were pressurizing the stock. It had to break one way or the other. Whichever way it broke, it was to lead to releasing the pressure, thus creating a strong move. Not all breakouts will succeed. However, if you have proper stop loss procedures, the losses can be kept minimal. And the breakouts that work will assure some big gains.
Chart courtesy icharts.in