Breakout and breakdown

What it means

A breakout is price closing above a resistance zone it was previously below. A breakdown is the mirror: a close below a support zone it was previously above. They are the same event in two directions, and this publication names them separately only because the direction is the informative part.

The word that carries the weight is CLOSE. Intraday, price pierces zones constantly and comes back; a bar that finishes beyond the band is a different claim from one that merely visited.

How we detect it

The engine scans the most recent twelve bars against each zone. A breakout is recorded when a bar closes above the top of a resistance zone and the previous bar closed at or below it — the transition, not the state, so a market that has been above a zone for a week does not report a fresh breakout every bar.

A breakdown is the same test at the bottom edge of a support zone.

The classification is provisional until the following bar exists. If the next bar closes back inside, the event is recorded as a fake or failed breakout instead, and the breakout is never published. That check has its own page.

When the read carries information

• The zone was a real one — two or more touches, drawn from clustered swings rather than a single spike.
• The bar closes well clear of the band rather than a fraction beyond its edge.
• Volume on the move is elevated against the recent average, which the engine reports separately rather than folding into the event.

When it misleads

• The instrument gaps. A gap opens beyond the zone without price ever trading through it, and the close-based test records a break that no participant had to trade through.
• Around a scheduled release, a first bar can close beyond a zone and be entirely undone by the second. The engine's next-bar check catches many of these, and it cannot catch the ones that take three bars to unwind.
• On low-volume sessions — a holiday, an early close — a thin bar can close beyond a band that a normal session would have defended.

How it reaches you

A breakout appears in our answers as an observation with its bar's timestamp: something happened at a zone, on this timeframe, this recently. It carries no implication about what happens next and no suggestion of any action.

When the same zone produces several events, only the most recent of each kind is kept, so a reader sees the state of the zone rather than a list of every time price brushed it.