When the resistance (support) is violated, the term used is breakout. The breakout is confirmed if the price does not retrace back immediately within the support/resistance level. A false breakout happens when the price crosses the resistance(support) for a very short time and finally continues within the resistance (support) levels.
The supports and resistances are subjective concepts and need a good ability to be identified. However, there are some guidelines that make it possible to identify these particular price levels with greater certainty. In particular, the reliability of a support or resistance increases when:
- when the volumes are very high
- the number of times they are touched without being violated
- they are relative highs or lows of the market
- they are absolute highs or lows of the market
- they are round figures (eg 6500, 40000)
A support (resistance) level which is broken will automatically become a new level of resistance (support). This is called the change of polarity principle. As we can see from the chart below, the resistance level (blue dot) has been broken and was then transformed into a support level (red dots).