Volume breakout scanner: price breakouts that volume confirms

A price breakout is more convincing when many shares change hands. A volume breakout is a close above a prior high on volume well above normal, which suggests real demand rather than a thin, easily reversed move.

Watch the Popular Scans in the scanner (Hindi, from 8:51).

The rule

The scanner’s volume breakout screen lists stocks that closed above their prior 50-day high on the latest trading day, with volume at least a chosen multiple of the average. The default is two times the average, and both numbers can be changed.

Why volume matters

A breakout on light volume means few buyers were willing to pay up; it is easily reversed. A breakout on heavy volume suggests institutions or large groups of traders are involved, so the move has more fuel. Neither is a guarantee, but heavy volume is one of the better filters against false breakouts.

False breakouts

• Closes just above the high on average or low volume.
• Breakouts in a falling market, where gains fade quickly.
• Stocks already far above their moving averages, where a breakout is a late entry.

Using the screen

Run it after the close, then open the charts and check the base before the breakout: was it tight, and was volume quiet? Combine it with RS, the VCP and cup with handle screens to find the breakouts that came from a good base.

A worked example

A stock’s prior 50-day high is 420 and its average daily volume is 800,000 shares. Today it closes at 428 on 2.1 million shares, more than two times the average. That fits the screen. If it had closed at 421 on 750,000 shares, nothing in the volume suggests strong demand, and the move is easily reversed.

Strategy examples

These are illustrative rule sets that show how the scanner can be used. They are not recommendations or advice, the numbers are examples, and rules like these can lose money. Test any idea on your own and manage risk before acting.

Breakout from a good base

1. Run the volume breakout screen after the close with volume at 2 times average or higher.
2. Open each chart and look at the base: tight and quiet, or sloppy?
3. Keep only breakouts from tight bases with high RS.
4. Set a stop below the breakout candle’s low or the base low.

Wait for the retest

1. Add the best breakouts to a watchlist.
2. Look for a pullback toward the old high that holds on lower volume.
3. Act only if price bounces and volume returns.

Market filter

1. Check market breadth and trend.
2. In a falling market, expect more false breakouts and take fewer, smaller trades.
3. Note results in your journal to see what works.

Common mistakes

• Chasing a breakout that is already far above the high.
• Treating any high-volume day as a breakout.
• Ignoring the market trend.
• Setting a stop so wide the position becomes too large.

Frequently asked questions

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