Thomas DeMark's Approach, Part II: TD Breakout Qualifiers

A break of a trend line is only useful if it is real. Many breakouts fail within a bar or two and trap traders who acted on them. Thomas DeMark defined three tests, called TD breakout qualifiers, to judge whether a break of a TD-line (see Part I) is likely to hold. A breakout that passes at least one of them is treated as valid.

Qualifier 1: the close before the breakout

The first qualifier looks at the bar just before the breakout:

• Upside breakout: valid if the close of the bar before the breakout is lower than the close of the bar before that.
• Downside breakout: valid if the close of the bar before the breakout is higher than the close of the bar before that.

The logic: if price breaks out right after a move in the opposite direction, the buyers (or sellers) behind the break are strong enough to reverse the short-term move, not just extend it.

Fig. 1. The first TD breakout qualifier.

Qualifier 2: the open of the breakout bar

The second qualifier is stronger than the first. DeMark considered it enough to enter even when the first qualifier says the breakout is false.

• Upside breakout: valid if the breakout bar opens above the downward TD-line.
• Downside breakout: valid if the breakout bar opens below the upward TD-line.

A gap through the line at the open shows that demand (or supply) built up before the session started.

Fig. 2. The second TD breakout qualifier.

Qualifier 3: buying or selling pressure

The third qualifier estimates whether the pressure on the previous bar was enough to carry price through the line:

• Upside breakout: take the close of the bar before the breakout and add the distance between that close and its low (or the close two bars earlier, if that is lower). The breakout is valid if this sum is below the breakout level, so the move through the line is more than the previous bar’s buying pressure alone would explain.
• Downside breakout: take the close of the bar before the breakout and subtract the distance between its high (or the close two bars earlier, if that is higher) and that close. The breakout is valid if the result is above the breakout level.

Fig. 3. The third TD breakout qualifier.

What comes next

Once a breakout passes a qualifier, the next question is how far price is likely to go. DeMark answered it with three TD price projections, covered in Part III.

Part 2 of 5 in the Thomas DeMark’s Approach series. Previous: Part I: TD-Points and TD-Lines. Next: Part III: Price Projections.

Screen for it on MarketInOut

Each TD-Line event in our formula language comes in four forms: the plain cross and one for each qualifier (q1, q2, q3). For example, NYSE and Nasdaq stocks that broke above a level 1 TD-Line and passed qualifier 2:

exch(nyse,nasdaq) and type(stock) and td_ubm1q2

Rewritten in October 2026 from an article in MarketInOut’s original article library.