In order to have a breakout or a breakdown we must first have consolidation. The upward breaking of a resistance is called a breakout whereas the downward breaking of a support is called a breakdown. The entry point is after the breaking of the support/resistance.
Breakout/breakdown is one of the most common ways price charts are progressing and they can give high possibility clues as to where a price will move next. Trading breakouts/breakdowns is not easy and requires great risk management (as every trading strategy).
Breakout at SPY daily chart
Breakout at BAC daily chart
Breakdown at MS daily chart
Breakdown at LNG 5 minutes chart
When to trade breakouts-breakdowns
It is strongly recommended to trade breakouts-breakdowns only in clearly directional markets. Momentum and sharp movement is needed in order for the breakout-breakdown to be successful. In a choppy market they produce repetitive false signals which result in losses through the activation of stop orders. In US stock exchanges the optimal time is the first and the last one and a half hour of the daily session.