What actually makes a good stock breakout (and what doesn't)

Every screener can show you stocks hitting new highs. That's the easy part. The harder question is whether that move is worth paying attention to or just noise. Looking at thousands of historical breakout signals and what followed, a few patterns consistently separate the ones that follow through from the ones that fade.

The ceiling matters more than the number

A stock that breaks above a price it tested three times over the past six months is a very different signal from one that's just drifting to a new intraday high in a slow uptrend. The more times a level has acted as resistance, and the longer it held, the more meaningful it is when price finally clears it.

This is why the ceiling breakout detector in Breakout Scanner doesn't just look at whether a stock is at a 52-week high. It identifies whether a stock had a defined price ceiling that held for a meaningful period, and whether price has just cleared that level. That distinction matters a lot in practice.

Volume is the confirmation you can't skip

A breakout on thin volume is suspicious. If a stock pushes above resistance on the same volume it trades every other day, there's not much conviction behind the move. You want to see relative volume well above average: 1.5x at minimum, ideally 2x or more. It means buyers are showing up with real size, not just a few limit orders getting picked off.

Relative volume is tracked as a first-class metric in every Breakout Scanner scan for exactly this reason. A breakout with 3x average volume tells you something. A breakout with 0.8x volume is probably a head fake.

Context from the broader trend

Breakouts that happen in stocks already trending above their 200-day moving average tend to behave differently from breakouts in stocks that have been in downtrends. Both can work, but the probability distribution shifts. A breakout in a stock that's been building a base above its major moving averages is working with the trend. A breakout in a stock that's been beaten down is a reversal play, which is a different game with different odds.

This is one of the things the AI screener handles well. You can specify “above the 200-day” or “below the 50-day but reclaiming the 20-day” and the system maps that to the right filters. Describing the context you want is much faster than clicking through dropdowns trying to express the same idea.

What the backtest actually tells you

The reason the backtest lab exists is because looking at individual breakout examples is misleading. You can always find a few great ones after the fact. What matters is the distribution: across all historical instances of a pattern, what happened on average? What was the median? And what did the bottom 10% look like?

The P10/P90 range is shown for this reason. The average return might look fine, but if the P10 is -15%, you need to know that before sizing a position. Breakout trading works on probabilities, not certainties, and the backtest lab is there to help you see the actual shape of those probabilities.

The ones that don't work

Breakouts in low-float stocks with no institutional volume. Breakouts that happen on earnings gaps where the move already priced everything in. Breakouts in stocks drifting sideways with no real buildup of tension at the resistance level. These all show up on basic screeners, and they pad the signal count without adding much value.

Filtering these out is half the work of a good screener. Breakout Scanner lets you combine breakout detection with additional conditions (volume thresholds, moving average positioning, proximity to levels) so you can narrow down to the setups that actually fit your approach.