[Soultrader]

Nice chart walterw. I especially enjoy it because it is a typical lunchtime fakeout breakout. I see this very often during the doldrums which is why I do not trade during this period. A great example of playing failures... and very interesting divergence on the MACD.

I cant see precisely but the failure violated the previous high by roughly 1-1.5 pts? Im not used to the ES so I am not sure if this is the typical average popup on a breakout failure. For the YM its a tiny 3-8 pts... so 1-1.5 ES pts seems like a monster to me. (gets you a little worried if its a valid breakout or failure)

I do think alot of new traders place orders right above the high to play a quick momentum. Once their buy stops trigger, the markets swiftly reverse making this false breakout strategy a good trading opportunity. Similar to the YM setup, you could play the ES with the same risk parameters. Place a short right below the initial breakout point. When price is rejected and comes back down, you are in at a fairly early point. Although price may go on to test the breakout high, usually you have a chance to exit with at least 10-20pts or 1-2ES pts. (I like to scale out)