Be Careful! Don't Get Stuck In False Breakout Share Movement

Share illustration (Photo: Doc. Antara)

JAKARTA - Investors are reminded not to get caught up in stock price movements that violate the upper limit or breakout, with a false breakout type.

Financial Expert Ajaib Sekuritas Chisty Maryani explained that false breakouts occur when stock price movements have passed a certain level, but then turn around and do not continue the strengthening trend (bullish) or weakening (bearish).

Those trapped with false breakouts have the potential to buy stocks at the top price. This is due to profit-taking in the resistance area, so that high selling pressure makes the price drop," Chisty said quoting Antara.

In order to avoid the risk of false breakout, he reminded traders to look at prices in longer time frames, analyze price movements from time to time, and use auxiliary indicators such as MA, MACD, and Stochastic.

On this occasion, he gave tips in order to avoid the movement of false breakout stocks, first, it is necessary to know fundamentals to see strong trends in the stock market.

According to him, if a stock is in a strong trend and supported by good fundamentals, the potential for shares to break out the resistance level is very large.

"The news about certain stocks has the potential to significantly affect and drive the share price," Christy said.

Second, if you see the potential for a stock to break out, traders should wait until the breakout is confirmed to be valid by looking at the shape of the candlestick when it closes the market.

Traders can take advantage of the Advance Charging feature in the Ajaib application to view important technical indicators such as Moving Average (MA), Exponential Moving Average (EMA), and Bollinger Band (BB). These indicators function to confirm the movement of trends from a stock," Christy said.

Third, he continued, a breakout accompanied by high trading volume indicates a trend will continue, and vice versa, a breakout that occurs when trading volume is low, then the stock price has the potential to experience a reversal of the direction (false breakout).

Then, fourth, to mitigate trading risk with a reference breakout, traders can install Stop Loss right at the predetermined support point. Stop Loss is important so that traders don't suffer too big losses if the share price breaks out at the support level," said Christy.