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Volume Break Out
A breakout strategy seeks to capture strong price moves that occur when a stock emerges from a period of consolidation into a new upward trend. Typically, the stock has already been trending higher, followed by a pause where it trades in a tight range as investors digest prior gains.
During this consolidation phase, volatility and trading volume often contract — a sign that selling pressure is being absorbed and supply is drying up. The breakout occurs when the stock moves decisively above this range on a surge in volume, indicating renewed institutional demand and the potential start of the next advance.
This approach, popularised by William O’Neil, focuses on identifying moments when a company’s strong fundamentals align with clear technical confirmation that buyers are regaining control. The goal is to participate early in a new uptrend while managing risk tightly if the breakout fails to hold.
Palantir (PLTR) –Breakout Setup
Palantir has shown a strong earnings reaction, followed by a period of tight consolidation — a constructive sign that supply has dried up. Volume during the consolidation phase steadily declined, indicating that sellers have largely exited the stock. As the chart shows, volume then expanded sharply as price broke out above the consolidation zone, confirming renewed institutional demand.
This type of setup — a breakout from a well-defined base on strong volume — is characteristic of classic William O’Neil-style patterns. The move suggests momentum could continue, particularly with the relative strength (RS) line showing a blue-dot signal, marking new highs relative to the market.
However, it’s important to recognise that risk is elevated here given the size of the breakout candle. Entries can be considered either at the open following the breakout, or on a confirmed close above the breakout level with sustained volume. Given the sharp move, position sizing should be conservative, with stops ideally set no more than 7% below the breakout point to manage downside risk.