Breakout

A change in a stock’s price that surpasses previously established levels of support or resistance.

Mandy, a high school freshman, decided to start investing in the stock market with her income from babysitting, in spite of the fact that she knows nothing about stocks.

She read a few articles about technical analysis and chose to invest in a stock because it “had a cute chart” with recurring support levels near the current price. She believed this offered protection from meaningful downside.

A week later, the CFO was arrested on fraud charges, resulting in the stock experiencing a breakout to the downside. The stress also created a breakout for Mandy, who is now investing in Proactiv.