Many traders often come to me with this question, " How can I know what stocks are going to break out in price?"Indeed, if you can identify what stocks are going to break out in an explosive move, you can jump on these stocks to trade them before they start to move.
While it cannot be denied that this is a trading technique, and have elements of speculation, we can use technical analysis to help us nail most of these moves by using performance studies on price and volume.
There is a predominant school of thought that volume preceeds price. In other words, we will see an increase in volume of a stock before its price starts to increases or moves up. Some call this
On Balance Volume outbreak.
Irregardless of what technical analysis software you use, you can even have records of price and volume and put them onto a spreadsheet to compute changes in volume and price of a stock or an index to detect these volume outbreaks.
