How do you determine a breakout from a false breakout?

[walterw]

would love if you guys could post charts of this concepts, imagining this concepts on a virtual chart on my head just gets the entire concept dificult to understand... nice thread indeed,but poor graphic examples.... cheers Walter.

[torero]

	Quote:	Humble1
	This is good. Makes sense. Most breakouts will only retrace 40 to 50% of the initial move, if they retrace at all. Other will form a high tight flag just above the breakout, and then move fast. Volume needs to expand slightly to confirm the breakout. It also pays to know where major support and resistance is before hand... gaps that have never been tested have a high odds of stopping breakouts. Good stuff. thanks.

Humble1! Nice to have you on board. Insightful observation with concrete explanation as usual. Hope you can contribute more in the future!

[Humble1]

	Quote:	torero
	Humble1! Nice to have you on board. Insightful observation with concrete explanation as usual. Hope you can contribute more in the future!

I'll post some charts on this, but for now, last week, ER2 [R2K mini] failed an ascending triangle on the 60 minute chart. Something very definite happened right after the breakout to setup the bearish tone. See if any of you can pick it out.

[torero]

I thought the 825 was the measured from the double bottom.



If you mean the last gasp on late Friday on new high with low volume, I think I see it. It closed at resistance, 825, top of the old unfilled gap. I've noticed close at resistance is usually a selloff the next morning. Might just be my bias though.

[Humble1]

this is what I am talking about....yes, there are other patterns with targets yet to be reached.

[notouch]

Breakouts are easiest to confirm if you trade a daily timeframe. A close above the breakout level and strength into the close would indicate follow through in the days to come. GBP/USD has just (this morning, London) broken above it's previous high so will make a interesting case study of the theory. Can it close strongly? If so, expect follow through.

[Nick1984]

	Quote:	Soultrader
	I would say I trade 90% futures, 10% stocks. I don't see why the TRIN breakout would not work for stocks. I suggest testing this out first. I use this strategy for futures only. One similar strategy you can use for equities is TICK range breakouts. I know many stock traders who use this strategy. Anytime you have the TICK stuck in a 2 hour range, watch for new TICK highs or lows. The setup is to go with the TICK breakout.

I haven't used TRIN before because for some reason I can't gague its reliability. Its formula might be the inverse of price but its not an exact inverse relationship. Where charts show a trending pattern the TRIN often is flat looking. How do you interpret a flat looking TRIN? Furthermore does this make the TRIN a less reliable indicator? I'm in 2 minds about the TRIN myself.

[cooter]

	Quote:	Nick1984
	I haven't used TRIN before because for some reason I can't gague its reliability. Its formula might be the inverse of price but its not an exact inverse relationship. Where charts show a trending pattern the TRIN often is flat looking. How do you interpret a flat looking TRIN? Furthermore does this make the TRIN a less reliable indicator? I'm in 2 minds about the TRIN myself.

Here's the correct answer about the TRIN, directly from the fellow who developed it many years ago, Richard Arms:

http://www.armsinsider.com/education...sindextrin.asp

http://www.armsinsider.com/education...whatistrin.asp

Rather than give you anecdotal info about what its formula "might be", I figure you may as well find out yourself straight from the source.

[Rocky Mtn Trader]

Soul Trader,

I noticed in your post that you use the TRIN. Can you tell me more about this and how to get this indicator on my NT charts? Is there any information on how to use the TRIN when trading?

thanks.
.

[MC]

I know I wasn't asked, but my 2 cents is I prefer the VIX. TRIN often moves range bound where VIX tends to move more with the market (though inversely). The above actually shows the exact same days and time frames on both VIX and TRIN. You tell me what you see better through.
I do use the TRIN to look for extremes (2.0 and .6)



This is another tool I use to look for false breakouts. You can see how the up or down volume reacts to the range breaks.