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It is as if a massive sell order has been placed at the upper trendline and even though the stock is strong and in an uptrend, it takes some time to fully execute the order. Volume usually diminishes as the pattern develops. Once the overhead supply is absorbed, the stock is free to catapult higher because the lack of supply shifts the supply/demand imbalance to favor the buyers. Also, if indeed a stock is in a steady uptrend, every stockholder who bought in the prior several months will be showing a gain. Satisfied and happy stockholders rarely sell. This reality also helps to push the stock higher after the break.

The best breakouts occur ½ to ¾ on. Breakouts that art art breakouts occur &frac1e delayed until prices crowd into the apex usually fail or are mediocre at best. If by chance a stock trades below the lower trendline, it is not reason to go short. Instead, the trader ought to simply redraw the lower trendline and keep watching for an eventual break to the upside. This act of redrawing a trendline is pretty common. Remember, drawing trendlines is a subjective art at best. They are the trader's best guess as to where support and resistance could be or should be, so redrawing them is perfectly permissible.

Breakouts should be accompanied by a significant increase in volume. Failure to accomplish this doesn't render the breakout invalid, but a red flag is raised and appropriate stops should be employed.

There are two guidelines a trader can use to determine the extent of the rally upon breakout. The first expected price movement is approximately equal to the widest part of the pattern. The second price target is equal to the rally into the pattern. The extent of the advance will often depend on the overall market. A strong market will help greatly in achieving the more ambitious price target, but in a weak market, a trader should be happy with just a moderate advance.