Ask Colin

Which patterns create the most volatile breakouts?

I don't think anyone can answer this. In fact I don't think it has anything to do with the shape of the pattern, if that is what you mean.

The most volatile breakouts will occur when the market is most "surprised" by what is happening - first the insiders will rush in eagerly, if the news leaks, and then on the news.

So, we could have the most perfect textbook pattern and the breakout comes on news everyone is more or less expecting and starts off slowly. On the other hand, we could have the most ragged pattern that looks nothing like a textbook pattern we can think of, but the company discovers a new Bass Strait size oil field - then you will get a volatile breakout.

I think you are asking the wrong question. You are looking for charts to predict the future. It can't be done. That is the wrong way to use them. The right way is to buy breakouts and GO WITH THE ONES THAT WORK AND GET OUT OF THE REST QUICKLY.

There is one other thing. Volatility will depend in part on what the news is, but also much more on the size of company. No matter what the news is, it would be rare for BHP to double in a week, but a small explorer finding something could do that. Likewise, it will be hard for Woolworths to go up 10 times in five years, but a small company in a growth industry could.

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