This 30-minute chart of AK Steel serves as a good illustration of how breakouts - which at one time fed on themselves due to attracting new buyers and the capitulation of short sellers - have become more of an indication of reversal or mean reversion.

Note the first "breakout" above $70 about 6 trading days ago, which was greeted with an immediate smackdown. Also note that the second breakout yesterday, which took out last week's highs, was greeted the same way.

My sense is that a combination of highly capitalized short sellers defending their positions and quant/algorithm players - who now are heavy into the mean reversion trade - are responsible for this action.

The perhaps simplistic conclusion is to avoid buying breakouts and - if you have a very short time horizon - lighten up on breakouts. Then look to buy the ugly smackdowns, particularly if they are to defined support levels.

A logical follow-up question would be: If breakouts are dead, how do stocks power higher?

My response would be - gaps, most of which are event/catalyst-based.

Priceline.com is a perfect illustration of a stock that is essentially in a coma between earnings releases and then pops and then almost immediately returns to comatose.

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