Brooklyn Breakout or Fakeout?

Investopedia defines a “breakout” as “a stock price moving outside a defined support or resistance level with increased volume.” And why is a breakout important? Because, according to Investopedia, “once the stock trades beyond the price barrier, volatility tends to increase and prices usually trend in the breakout’s direction.”

Since Q1–2015, Brooklyn new development has been trading within a relatively narrow trading range, with a support level of $1,000 per square foot and a resistance level of $1,200/sf.

However, beginning in the 2nd quarter of this year, a Brooklyn price/sf breakout seems to have occurred:

Great news for anyone purchasing new development in Brooklyn, right? Purchase now and prices should increase, building immediate equity in your home.

Well, not so fast. Although, for two consecutive quarters, price/sf is significantly higher than the long-term resistance level, Investopedia’s definition of a “breakout” includes the contingency that volume is increasing. As the chart above makes clear, that is not the case.

So, are we looking at a Brooklyn Breakout or a Brooklyn Fakeout (which Investopedia defines as price movement that appears to be a breakout, but returns to the trading range)?

The answer is unclear at this point, but certainly worth keeping an eye on.

Please contact us if you would like to learn more …