1. At the BO, there was a massive bullish candle with a very high volume. This took out the previous resistance level. 2. The retailers saw this opportunity because the price closed above the previous resistance. Hence, they entered Longs. 3. The BO was followed by a Doji and then a Bearish candle. This indicated no Bullish follow-up. 4. The next candle was the last try to trap more longs before breaking down. This is indicated by the good volume on this candle. 5. Finally the price broke down with back-to-back bearish candles and reached the previous swing low.
Warning candles: 1. Doji + Big Bearish candle indicating that there is no follow-up on the BO 2. Relatively good volume on doji indicates significant selling pressure. Never a good sign for a breakout. 3. A bullish breakout must always be accompanied by a good follow up, else it cannot sustain. Bullish BO needs good bullish candles, NOT dojis.
P.S: I am not saying the fakeouts can be avoided. But there are a few cases where fakeouts can be avoided. Also, this is NOT investment advice. This chart is meant for learning purposes only. Invest your capital at your own risk.
You have given a good explanation of what happens during a false bo. A LOT to LEARN !! can you also give us some few good examples of a successful BO with explanation.. want to learn about the psychology what goes in there ..
NICE work ...
johntradingwick
⋅
@rachit0906, Thanks for the feedback, Rachit. I'll try to post about successful ones too.
SHAIL11
⋅
amazingly explained
psrarunisaimaran
⋅
It has broke the .618 retracement
Hemuaa
⋅
Bhai Itna gyaan de diya....lekin fir bhi Bandhan Bank to nai gaya na uupar...
Kya faayeda aise gyaan ka ??
@MahimanSingh, Arey bhaisaab...lagta hai wakaalat k liye laga rakha hai tumhe. :D :D
Khair...lete raho gyaan.
johntradingwick
⋅
@Hemuaa, Post ka matlab toh samajh le bhai. "Trap" likha hai itna bada bada. Plus chart mein clearly likha hai, "Even if the market doesn't reverse, the longs are already trapped". Itna padhna toh seekh le bhai. Aur bhai dekh simple matter hai, Post sahi naa lage toh ignore kar de, tension kyun le raha hai.
NICE work ...