We all know how important technical base patterns are when it comes to investing strategy. After all, these patterns can provide an investor with the clues and information needed to make an informed decision about entering or exiting a position.
Recently, the most successful base pattern has seen a pickup in breakouts. In this article, we’ll discuss why this strategy is so successful and provide two examples.
One of the main reasons why breakouts are so profitable is because they can indicate a shift in the market’s sentiment. Many traders and investors keep a close eye on the markets, looking for patterns and signals that could signal potential gains or losses. When breaking into a new record high, the story suddenly changes. Suddenly, investors might begin to bid up the price of the underlying asset.
Solar energy stocks have been one of 2020’s big success stories, and many traders have looked to these breakout stocks to make a killing. Take Enphase Energy (ENPH) for instance. At the beginning of 2020, ENPH was trading at just $5.50. Since then, the stock price has more than quadrupled, reaching an all-time high of $21.26 on March 11th. This dramatic increase was a result of the ongoing drive to reduce global emissions and switch to renewable energy sources.
Financial technology stocks are another sector that have experienced a breakout. PayPal (PYPL) recently reached an all-time high of $284 after undergoing a strong rally since early 2020. This rally was sparked by economic uncertainty, coupled with the need for buyers and sellers to rely on digital payment platforms such as PayPal.
The key takeaway is that breakouts can provide traders and investors with incredibly profitable opportunities. However, investors need to be mindful that these investments also come with a degree of risk. As such, investors should always employ the appropriate risk management and research strategies when considering stocks that have broken out.