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The Potential Breakout Failure Pattern

NSE:NIFTY   Nifty 50 Index
Hi,
Sharing with you one of my favorite BO failure pattern.

What is this pattern?

It can be called as a topped out or bottomed out pattern. Which does not mean at all that the stock would start a major correction from this failure but only hints dying buyer interest. Many a times the stock see sharper pullbacks due to exits of the late bulls trapped in the BO spike. The most important part of the pattern is the price action after the BO candle. The pattern initiates with NO FOLLOW THROUGH of the breakout. That is, if after a tremendous volume breakout there is no follow up by the buyers -- a sharp reversal 'can be expected'.

As can be observed on the chart, candles A and B faced resistance at some price level and then in candle C there was a breakout with exceptionally higher volume . Normally this volume would be higher than several preceding intervals/candles and not just a few intervals as shown in this chart due to space constraint.

But then this BO is followed by inside candle/candles, showing that there is lesser buying interest and the price ultimately starts drifting down.

On which Time Frame (TF) this pattern is applicable?

The pattern can be observed on any TF from one minute to weekly, so its applicable on any TF. But one thing has to be kept in mind that one should trade this setup on the same TF in which it has been observed. Example, if this pattern is formed on Houly chart then wait for the price action to proceed on the hourly chart only. Lower TF entries are only preferred if the proper entry is missed for some reason.

Where should one enter?

Its a personal choice, depending upon the traders' personality. I would prefer to enter below the low of that killing higher volume BO candle, and I would need no second confirmation after that. In this case, If the BO candle low was below the BO level then it would be a higher probability pattern.
However, the Risk to Reward ratio should be considered first before entering. If the BO candle is very wide then either reduce position size or wait for smaller pullbacks after the price trade below the BO candle. In the latter case we may prefer to refine our entry through a lower TF chart.

Any profit objectives?

1:1 or 1:2 profit targets
An important support can also be a profit target.
Any Moving Average that one follows, 20 SMA may be.
If SMA is too near then some FIb. level can be a choice.

Is it a high probability setup?

Yes, for me it works. But nothing in this world is short of failures.
So trade and learn or you can also try the other way round..learn and trade.

Can it be used for both breakouts and breakdowns?

Absolutely.

I will try to put some examples..just..
Hit like, comment and subscribe.
Trade safe, be healthy.

Regards
Bravetotrade.
Comment: A small wick at the top of candle D , which just takes the high of candle C for a while, is also common in this pattern.
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There are thousands of such examples and I would love to post all of them but time is the real problem here.

I hope I was able to convey what I wanted to, through these examples. All the best with the pattern.

For more educational posts, keep appreciating coz your support is important.

Happy Diwali to all my fellow traders.
Thanks
Reply
Bravetotrade AkshathBharathi
@AkshathBharathi, welcome.
Reply
Very insightful and practical, as always.Thanks for the effort.
Yes the definition of no_follow_up is clear, but the real question is the definition of YES_follow_up. According to your "THE CONFIRMATION" post <which is one of my favs>, only the Two_full_bar and Pullback_Retest_reversal seems to be more conforming,unless someone wants to go with aggressive BOS, as long as they trade just a single BO candle, i think.
Today's Raymond chart gave similar setups. PRR seems to work good for a few points, atleast reversing back till the opposite end of BO candle level, or the first resistance

Reply
Bravetotrade Einstein15
@Einstein15, Nicely put. I am happy that you really understood the message in the posts. And yes PRR is my fav. too. I think the overall trend determines the direction of our trades. Patterns just help.
Reply
Einstein15 Bravetotrade
@Bravetotrade, :) . Wishing you a very Happy and Prosperous and Trending Diwali!
Reply
Bravetotrade Einstein15
@Einstein15, Thanks.. wishing u the same 👍
Reply
DeepakBanga Bravetotrade
@Bravetotrade, Nice explanation of exhausted trades. Can you pls help in understanding abbreviation term PPR here.

Thanks
Deepak
Reply
Bravetotrade DeepakBanga
@DeepakBanga, thanks..plz read

for PRR , I am sure you ll like it.
Reply
Bravetotrade Einstein15
@Einstein15, This pattern in particular is a contra call and yes, it does not work always :)
Reply
sir could u pls explain the term "No follow up"
what should be the candle D for a perfect breakout
Reply
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