Jump to content

Welcome to the new Traders Laboratory! Please bear with us as we finish the migration over the next few days. If you find any issues, want to leave feedback, get in touch with us, or offer suggestions please post to the Support forum here.

  • Welcome Guests

    Welcome. You are currently viewing the forum as a guest which does not give you access to all the great features at Traders Laboratory such as interacting with members, access to all forums, downloading attachments, and eligibility to win free giveaways. Registration is fast, simple and absolutely free. Create a FREE Traders Laboratory account here.

mo money

False Breakouts, How To Predict Them?

Recommended Posts

A pattern failure of a false breakout usually leads to a quick reversal. I would like to learn how I can predict a false breakout from a real one before the move happens.

 

It appears that professionals usually get in before a breakout and would short new highs. How are they able to do this?

Share this post


Link to post
Share on other sites

Is there no way to anticipate breakouts or false breakouts?

 

The broker dealer and financial sectors tend to lead the markets. Would looking at these sectors help anticipate a move in either direction? For example, if a stock is consolidating in a tight range and the broker dealer index breaks a key resistance, would this indicate this stock to breakout of the range?

Share this post


Link to post
Share on other sites
Is there no way to anticipate breakouts or false breakouts?

 

The broker dealer and financial sectors tend to lead the markets. Would looking at these sectors help anticipate a move in either direction? For example, if a stock is consolidating in a tight range and the broker dealer index breaks a key resistance, would this indicate this stock to breakout of the range?

 

Yes, they should be able to give you a heads up as they are leading sectors. I assume you are trading stocks. Perhaps you should take note of this and observe to see if it works? Also, I do think it depends on the stock you are trading. If you are trading a stock that moves inversley with the financial sector than it will probably not budge.

Share this post


Link to post
Share on other sites

I tend to use market internals to anticipate breakouts. One method I use is new TICK/TRIN highs or lows. You can also use the PREM to spot any buy/sell programs at key price levels.

 

For methods to anticipate a pattern failure, if a key level of resistance is above a range I usually short at this level. For example is the YM is stuck in a range from 11770 to 11790 and 11800 is a key level of resistance, I will usually fade this level aiming for a breakout failure. I noticed that key price levels take several attempts to break. Usually the first attempt is a good fading opportunity.

Share this post


Link to post
Share on other sites

I tend to keep a close eye on trade volumes, as there needs to be a big push to breakout, and if there is no volume behind it, will it stick?

 

Sometimes a "false" breakout can be the first part of a proper breakout. I have seen many situations where stocks have hit highs then drifted back, but after a little consolidation, they have had another go at the breakout point, and passed through.

 

There is no real set pattern , and it probably comes down to gut feeling and experience.

Share this post


Link to post
Share on other sites

As we are looking for changing trends we will often come across false breakouts.

 

While I would never normally rush in on an initial breakout, I take a lot of notice of trading volumes. This is perhaps more useful when shares are falling, and we are looking for that last big sell-off before the shares bottom out.

 

Next time you see a share turning after a downwad spiral, check the volume just before the turn, and chances are you will see the last leg of the sell off, on high volume.

Share this post


Link to post
Share on other sites

"The breakout has to be a momentum bar stabbing right through it plus a 2-3 candle pullback and take it wait for the close also to be extra safe never enter on the first breakout."

 

Say what?

Share this post


Link to post
Share on other sites

This is not a prediction, but a wonderful insight from Schabacker on false breakouts.

 

He discussed trading (for example) breakouts in a triangle and then a false breakout (he calls "out of line movement) will give the trader insight into the direction of the true breakout.

 

The key is this, if you got whipped on the out of line movement, then you got an idea that the stock will break out in the direction ouf the out of line, and then the next entry may be the correct one.

 

"To the trader who did not act prematurely, however, the one-day out-of-line gave valuable information. It suggested, first, that the pattern of price trend would be up, in the direction of the out-of-line movement." - Richard Schabacker

Share this post


Link to post
Share on other sites

Through my analysis of charts I can see a lot of false breakouts usually its 1 and then price rallies up and does a true breakout of the symetrical triangles usually. There are so many systems designed up trading a false breakout some traders view them as not false but a springboard to a rally coming up.

Share this post


Link to post
Share on other sites
Guest OILFXPRO

Following breakouts offer better success rates

 

a)The second breakout is a confirmation sign of market intent , two false breakouts is rare.

 

b)new trending breakouts with hh or ll tend to be in tune with markets

 

c) following underlying and preceding trend

 

d) backed with fundamental price drivers

 

e) Bounce off (rejection)previous resistance / support breakout

 

f) momentum breakouts

 

g) no divergence on stochastic on 15,30 and 240 min

 

h)channel breakouts in trending markets

Share this post


Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.
Note: Your post will require moderator approval before it will be visible.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.


  • Topics

  • Posts

    • CARDANO PRICE EXPOSES TO $0.98 SUPPORT LEVEL ADA Price Analysis – January 25 When the sellers increase their momentum to push down price below $0.98, the support level of $0.83 and $0.73 may be tested. In case the Support level of $0.98 holds, the buyers may push up the price towards $1.11, $1.30 and $1.46 levels. ADA/USD Market Key Levels: Resistance levels: $1.11, $1.30, $1.46 Support levels: $0.98, $0.83, $0.73 ADA/USD Long-term Trend: Bearish Cardano is bearish on daily chart. Buyers and sellers are struggling over the crypto. The sellers are trying to overpower the buyers. Former support level of $1.30 and $1.11 has been penetrated downside by the sellers and the price exposes to $0.98 support level. There is tendency for the price to decline further if the sellers maintain their pressure. ADAUSD Daily chart, January 25 Cardano has crossed the two EMAs downside, currently trading below the 9 periods EMA and 21 periods EMA at distance which indicate a bearish movement. When the sellers increase their momentum to push down price below $0.98, the support level of $0.83 and $0.73 may be tested. In case the Support level of $0.98 holds, the buyers may push up the price towards $1.11, $1.30 and $1.46 levels. The relative Strength Index period 14 is at 40 levels with the signal line pointing downside which indicates sell signal. ADA/USD Medium-term Trend: Bearish Cardano is on the bearish movement on 4-hour chart. The bullish movement could not continue when the buyers pushed up Cardano to test the resistance level at $1.64. The bears reacted against the price increase with the formation of bearish engulfing candle. The price started decreasing and the support level of $1.30 is broken downside. Further price decrease envisaged as the price is below the two dynamic resistance levels. ADAUSD 4-hour chart, January 25 The price is trading below the 9 periods EMA and 21 periods EMA. The relative strength index period 14 is at 40 levels and the signal line pointing down to indicate sell signal. Source: https://learn2.trade 
    • SOLANA REACHES OVERSOLD REGION AS THE ALTCOIN MAKES DEEPER CORRECTION Solana has fallen to the low of $87 SOL/USD has reached the oversold region Solana (SOL) Current Statistics The current price: $90.94 Market Capitalization: $46,528,296,188 Trading Volume: $4,555,783,625 Major supply zones: $280, $300, $320 Major demand zones: $160, $140, $120 Solana (SOL) Price Analysis January 24, 2022 Solana’s (SOL) price has fallen significantly to the low of $87 as the altcoin makes deeper correction. The crypto’s price corrected upward but faces resistance at $104. If the crypto is facing resistance at $104, it implies that the selling pressure will resume to the downside. Presently, the altcoin is fluctuating between $80 and $104 price levels. The crypto will resume trending when the range-bound levels are breached. For instance, if the bears break below the $80, the market will decline to $68 low. SOL/USD – Daily Chart Solana (SOL) Technical Indicators Reading Solana is at level 23 of the Relative Strength Index for period 14. The cryptocurrency is seriously in the oversold region. This is an indication that the current downtrend has reached bearish exhaustion. SOL/USD is below the 20% range of the daily stochastic. It indicates that the market has reached the oversold region of the market. Since December 29, the altcoin has been trading in the oversold region of the market. The 21-day SMA and 50-day SMA are sloping downward indicating the downtrend. Conclusion Solana is in a downward move as the altcoin makes deeper correction.. The current price action and Fibonacci tool analysis are closely related. The cryptocurrency has reached the oversold region and there is a possibility of price reversal. Meanwhile, on December 14 downtrend; a retraced candle body tested the 61.8% Fibonacci retracement level. The retracement indicates that Solana will fall to level 1.618 Fibonacci extensions or $79.34. SOL/USD – Daily Chart     Source: https://learn2.trade 
    • Date : 25th January 2022. Market update – January 25. A flight out of equities and into the safety of bonds was the opening theme yesterday – Could we see this repeated? US futures are under pressure once again, alongside a broad sell off across Asian equity markets. Tensions over the Ukraine, virus developments in China and the prospect of reduced central bank support all continued to weigh on sentiment overnight. The rise in Omicron cases ahead of the Lunar New Year holidays and of course the Olympic Games is adding to nervousness over slowing growth.   Australia’s inflation rate came in higher than expected, which added to growing conviction that the RBA will end its quantitative easing program at the February 1 meeting. Singapore surprised with a move to tighten policy outside of a scheduled review USD (USDIndex 95.90) saw a pullback after breaching 96.11. Treasury rates dove lower with a strongly bid 2-year sale extending the slide. The just auctioned 2-year rate dropped 7 bps to hit 0.970%. Equities – Hang Seng and CEI 200 expected to drop more than -1.8% today. The Nikkei closed with a loss of -1.7%, the ASX plunged -2.5% after the hot inflation report. Yesterday, USA100 crashed -4.9%, with the broader indexes over -3% lower before hitting bottom and paring losses. But a late buy the dip rally saw the USA100 rally 0.63%, with the USA500 and USA30 up 0.29%. USOil – back to $82.00 territory, – recovering some of yesterday’s losses, as growing tension in Eastern Europe and the Middle East fuelled concerns over possible supply disruptions. Lower US oil inventories are also providing support. Gold – held on to gains at $1841 as investors sought safety. Bitcoin steadied to $35,000 handle. FX markets – The Yen was supported as risk aversion picked up and USDJPY dropped to 113.66. EURUSD at 1.1306 & Cable below 1.3500. European Open – European stock futures are signalling a bounce back from yesterday’s sell off, with the GER40 and UK100 currently posting gains of 1.1% and 0.8% respectively. EGB yields are set to rise today, as stock markets bounce back from yesterday’s sell off. The German 10-year Bund yield is up 1.4 bp at -0.097% in early trade, the French 10-year up 1.3 bp, both underperforming versus Treasuries, which have moved higher overnight, as Asian stock markets sold off. Today – The FOMC meeting starts today, with an announcement due tomorrow, ahead of the ECB and BoE meetings in February. Geopolitical risks will remain in focus today, while the data calendar highlights are the German Ifo readings and the UK CBI manufacturing survey. Biggest FX Mover @ (07:30 GMT) Cocoa (-3.22%) Huge dive to 2488 from 2684 highs seen last week, breaking all daily SMAs (20-, 50-, 200-day). Fast MAs aligned lower intraday with all momentum indicators pointing further lower. Always trade with strict risk management. Your capital is the single most important aspect of your trading business. Please note that times displayed based on local time zone and are from time of writing this report. Click HERE to access the full HotForex Economic calendar. Want to learn to trade and analyse the markets? Join our webinars and get analysis and trading ideas combined with better understanding on how markets work. Click HERE to register for FREE! Click HERE to READ more Market news. Andria Pichidi Market Analyst HotForex Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in FX and CFDs products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.
    • How much is the minimum deposit to trade with this broker?
    • I first time hear about Ocata 😂 All others are well-known.
×
×
  • Create New...

Important Information

By using this site, you agree to our Terms of Use.