Downtrends and Breakouts

Notice in this chart that the NASDAQ Composite broke its five-month downtrend in mid January. The red line represents the descending line of resistance that was broken. The breakout itself is circled in yellow.

Remember, once a line of resistance is broken, that line then becomes support. Therefore, even though the NASDAQ Composite corrected after it broke out, it never broke the crucial descending line of support (that which was resistance). This was of crucial importance. Last, notice the volume was thinning out as the NASDAQ retested its support line. This was VERY good confirmation.

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