A breakdown occurs when a stock traders below a support level after trading in a congestion pattern. Traders typically look for an acceleration in the downward momentum of a stock when a breakdown occurs.
Notice how Qwest, in the chart above, is trading in a relatively narrow range of prices, often referred to as a “congestion pattern” or “trading range.” The breakdown occurs when prices close significantly beyond the lowest price in the pattern or range.
Some forms of momentum trading are based on selling short markets after they breakdown.
Breakdown is the opposite of breakout.