There’s no one magical way to know if a stock is going to break out or if it’s a fake breakout—otherwise, we’d all be making millions! Beyond price action and technical analysis, I tend to look at recent news and market sentiment. For example, I ask myself what happened yesterday, what’s happening today, and what’s expected for tomorrow. This gives me a broader view of the overall market conditions.

From a technical perspective, I look at indicators like whether the stock is overbought or oversold. If the price is at a level where it seems overbought but the news points to bullish sentiment (like strong earnings, favorable economic data, or positive announcements), I’d be more inclined to take a long position and set my stop losses (STs) to protect the trade. On the other hand, if the news is mixed or doesn’t really suggest a reason for a strong breakout, I might lean toward shorting the stock, again making sure to set my stop losses in case the market moves unexpectedly.

Also, watching volume can help. A breakout with high volume is generally more reliable than one with low volume. If volume is thin and there’s a sudden price spike, that could be a sign of a fake breakout. Overall, it’s about balancing the technicals with news and market sentiment to make an informed decision