Breakouts are exciting. You see a stock push through resistance, big green candles appear on the chart, and suddenly it feels like the move is leaving without you. That is usually when traders feel the most pressure to jump in.
The problem is that by the time the breakout becomes obvious, price may already be far away from the most logical place for a protective stop. You may still have a good idea, but the entry can require more risk than you really want to take.
The Breakout Point
During a recent Ticker Request Live, we looked at ticker NVTS (May 12 2026). Shares had been consolidating before breaking higher with several large green candles. A trader looking to buy the initial breakout may have placed an order just above the prior high. In this case, the high was around $19.79, so the entry may have triggered near $19.80 or $19.81.
The challenge was the distance to the protective area. If the stop were placed based on the recent market action, it would have needed to sit much farther below the entry. Price had already moved quickly away from the consolidation, so the risk had expanded along with the breakout.
We had no way of knowing exactly how far NVTS would continue rising, but we could see that buying after those large candles meant accepting a wider amount of risk.
Let the Party Cool Down
I’m a big fan of breakout trading when the entry comes on the return touch. After a stock breaks through resistance, it will often pause or retrace. During the broadcast, I described this as the “little cool down of the party after the breakout.”
That pullback can bring price action closer to the area it just broke through. On the NVTS chart, the earlier consolidation had formed a triangular pattern, and the upper purple trend line had helped contain price before the breakout. Once price moved above it, that same line became an area to monitor if the stock pulled back.
Instead of entering near $19.80, a trader could wait to see whether NVTS returned toward that upper boundary. During the session, I used an area around $17.33 as an example.
The protective area could remain in roughly the same place while the entry moved closer to it. That reduced the distance between the entry and the stop.
Why the Pullback Can Offer a Better Entry
The main benefit of waiting was simple: less risk on the trade. The initial breakout entry was farther away from the recent market support, while the possible pullback entry brought price closer to the area where the trade could be evaluated and protected.
That can also improve the potential reward compared with the amount being risked. Both entries may be aimed at the same move higher, but the pullback entry begins from a lower price and closer to the protective area.
Of course, the stock may continue higher without returning. Waiting for a pullback means you will occasionally watch a move leave without you, but it also helps you avoid forcing an entry after price has already become extended. There will always be another chart.
Former Resistance May Become Support
The area that previously held price down can sometimes help support price after the breakout. That is what we were watching on NVTS.
The upper boundary of the consolidation had acted as resistance. After the breakout, a return toward that line could show whether buyers were willing to defend the area. The line itself was only a guide, so price still needed to hold and begin stabilizing around it.
By the time we looked at NVTS, the stock had already pulled back from the breakout and was trading around $18. On the 60-minute chart, the RSI Power Zones had also returned toward the Bull Support Power Zone, which added to the idea that the pullback area was worth watching.
It did not guarantee that the stock would move higher. It gave us a more reasonable place to evaluate the setup than the top of the breakout candles.
Let the Market Come Back to You
The next time you see a stock breaking through resistance, take a moment before chasing it. Identify the level price broke through and look at where a logical stop would need to sit.
If the current entry creates more risk than you are comfortable taking, mark the former resistance area and watch for a pullback. The stock may return and give you a more manageable entry, continue higher without you, or fall back through the breakout area and show that the move was failing.
Any of those outcomes gives you useful information.
Breakout trading can be fun and exciting. Sometimes the better opportunity comes after the party cools down.
👉 PS — Trader Trainings Coming Up!
The Trader Training calendar has been updated! Here’s what’s on deck:
- Ticker Request Live — free weekly trading show
📅 Tuesday, August 11th at 4:30 PM ET - First 40 Office Hours → for First 40 Trading Club members
📅 Wednesday August 12th at 4:30 PM ET - Bonus Advanced Momentum Tuneup → for Advanced RSI Power Zones members
📅 Thursday August 13th at 4:30 PM ET
Visit himareddy.com/events for full details and registration.
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