Jonathon is watching the stock of his favorite company trade in a congestion area. He is watching closely for a breakout to jump into the market. He says he does not want to miss the breakout, but he is cautious not to assume a breakout prematurely.
a. Why do you think Jonathon is sitting on the sidelines while the stock is trading in the congestion area?
b. How might Jonathon recognize a breakout?
c. Explain the trade-off Jonathon is facing about being cautious regarding prematurely assuming a breakout, but at the same time being careful not to miss the breakout.