Last Updated on: 13th February 2021, 09:12 am
A breakdown is a breakout to the downside. A breakdown happens when there is a breakout downward through support. The buyers who used to be at this level are gone, but there is still selling pressure.
Price trades sideways for a while but it is unable to garner the strength to move higher. When this happens, it signals buyer weakness.
The price that breaks downwards through a support level is expected to continue to fall. This is considered a sell signal. Especially if the volume is also increasing.
If the price has fallen significantly since the break, a better price can be achieved by waiting for a reaction back.
Please note that price in an uptrend often triggers false sell signals on breakdowns through support.
Vincent Nyagaka is a Professional Trader, Analyst & Author. He has been actively engaged in market analysis for the past 7 years. He has a monthly readership of 100,000+ traders and has taught over 1,000 students since 2014. Vincent is also an experienced instructor and public speaker. Check out Vincent’s Professional Trading Course here.