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Breakoutfailure

Dr Reddy: Unable to sustain breakout above key level NSE:DRREDDY seems could not be able to pierce through the major resistance line around 4625 (the recent swing high). Note the volume. It's pretty significant and coincides with the Q2 result. So, things are interesting here. Chartically, the following traits are seen: A Head & Shoulder formation is seen with the neckline around 4200. There is a downtrend line coming down since last one year. The downtrend line & the H&S neckline is creating the symmetrical triangle (pennant) pattern. Now the most interesting part: 31/10/22 has it's Q2 earning date. And see the volume, huge surge. BUT The volume surge does not able to push the price above its recent swing high (Head of the H&S pattern) 4625. Rather it closes (CMP: 4433) closes near its long-term support line of 4420-4430 level. For it to go up, has to convincingly break past 4625 level. Tradewise, Resistance: 4625 Support: 4290 Next target: 4750/4900 The breakout above 4625 has to sustain good volume.
NSE:DRREDDY
by pradipandsuvra
BREAKOUT vs FAKEOUTTrading breakouts is a most profitable trading strategy that involves buying or selling an asset after a long period of consolidation. Confirming breakouts before jumping into a trade is the key task to become a successful breakout trader. Now lets see about the important key points to consider to confirm such valid breakouts TYPES There are different types of breakouts including 1)Trend line breakouts (diagonal form of S&R) , 2)Horizontal price breakouts, 3)Pattern breakouts (double top, double bottom & other) 4)All time highs/lows breakouts, 5)Fib level breakouts etc., The support and resistance lines that are drawn at potential breakout points "should be seen as area/zones instead of fixed lines" . BREAKOUT : A breakout is when the price of the stock breaches a support or resistance levels that has previously formed followed by a strong candle close. FAKEOUT : A false break or fakeout, as the name implies, is any move above a resistance or below a support followed by a reversal that fails to close above or below the broken level. WHEN THE FALSE BREAKOUT HAPPENS : A false breakout happens when there are no enough buyers or sellers to continue supporting the stock towards the breakout direction. In the examples above,the upper false breakouts happened because there were no enough buyers to continue pushing the price higher & tends to reverse similarly viceversa for the lower false breakout. VARIOUS SCENARIOS OF FALSE BREAKOUT POINTS TO REMEMBER 1)False breakouts can be avoided by waiting for strong candle closure above or below the levels to confirm the breakout strength. 2)Avoid the breakouts with non-stop parabolic movement (without pullback or retest). 3)Instead of using a single line as support or resistance, it is better to have an area/zone that covers all shadows in previous touches. 4)To take entry, always wait for the zone to breach by the candle closing confirmation combined with price action. Hope it was helpful to you, Happy Learning & Profit making :) Thanks & Regards Divyaapugal
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NSE:NIFTYEducation
by Divyaapugal
29
Channel Pattern Failed Breakout good RRThe Stock has formed a good Rectangle Pattern with alternate touches and good height. This simple pattern has broken the channel could not sustain and trading below the upper Channel. One can short the stock with reasonable SL for the target of 1165 which offers good Risk to Reward Trade. How to handle it please refer my earlier post Disclaimer : All ideas are my personnel view. Please take financial consultancy for trading decision.
NSE:JUBLFOODShort
by praveen.bhatiya
The Breakout Failure: Trade The Sulking EdgesHi Here I come with another educational post. This time I will try to explain the breakout failure pattern along with the psychology and manipulation behind them. For the sake of simplicity, I am taking examples of historical support and resistance levels. I will only explain the breakout failure pattern assuming that the breakdown pattern will be read upside down by the readers themselves. Ok..let's begin. THE BREAKOUT FAILURE I hope everybody understands what is a historical support. Simply put, its a point where the price has taken support and bounced multiple times. Now that we have a support level, some bigwig buyers will be interested in buying at that level. Generally these are FIIs and DIIs who want to put millions of Rupees into that stock at that particular level. But the problem for them is that, they do not have enough supply/sellers at that support level to meet their requisite demand. Why? because its a support level and nobody is interested in selling at support..right? Now that's how they cope with this problem...the manipulation. The Institutions have resources to manipulate :) hope you understand coz I dun wanna delve much into that in this article. In simple words I would just say that they have the power to push the price beyond certain levels. Ok now that we know the basic stuff let's get on to the chart. In the chart (Fig.I), the price bounced from the support multiple times thus forming a historical support. At point A, retail buyers were convinced that the support is valid. They also saw a bullish candlestick pattern and executed their buying orders with stoploss just below the support level. This scenario fetches a lot of supply (sell orders/stoplosses) below the support level. The price proceeded up for a while (due to desparate retail buyers) before the manipulator steps in. Now the manipulators only job is to push the price down so that retail stoplosses get hit (point B). As soon as the support is broken (sometimes by just a few paise) the stops are hit (opening big supply door for Institutions). At this time the breakdown short sellers also step in to further fuel the supply--the supply which fills the institutional demand. As soon as the institutional buyers absorb the supply, there would be no more sellers interested in selling, the bids start pushing the price higher. At point C the pull back sellers step in, further absorbed by the institutions. Now we have the breakout sellers and pullback sellers who have put their stops just above the historical support. Now the manipulator has another job to do--to hit a buy stop. As as soon as it happens the price shoots up. Here the traders like me watching charts whole day long, looking for such lucrative opportunities, place their limit orders just above the short sellers sulking edge--the point C. For me in such a setup, the most important thing is searching for the C point. At every uptick the short sellers would be forced to cover, pushing the price strongly in upward direction and ending the story. Same is true for breakdowns. Trust me, nothing works 100% but somethings gift us with higher probability. I ll try to post some examples. But for that I need a better response. I hope that with this pattern, some traders will be promoted to a smarter category. Regards.
NSE:NIFTYEducation
by Bravetotrade
16
The Potential Breakout Failure PatternHi, 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.
NSE:NIFTYEducation
by Bravetotrade
21
How to Trade A Range and Potential BreakoutHello Traders, All of us want the price action to follow our direction of trade but that doesn't happen always. The price action has a natural tendency to move up and down; build ranges and develop patterns. Most of the ranges and patterns are like whipsaws and many traders stuck in these situations and lose money. The most effective ways to deal with such a price action is patience and a better strategy. When I say better strategy that means the one which keeps you ahead of the others. In this backdrop, I have tried to spot better entry points in case the price action builds a range after a nice up move and we are visualizing a potential breakout. Entry at these spots doesn't guarantee sure win but minimize our risk and increase the chances of reward. After an entry, stops can be placed below the range or below the prior swing low -- whichever suits the situation. Same strategy can be applied, in opposite direction, in case the overall trend is down and we visualize a potential breakdown after a range. Notes on the chart. Hit like for better educational publications in future. Comments are welcomed. Trade safe. Best Regards Bravetotrade
NSE:NIFTYEducation
by Bravetotrade
8
Anticipate the Breakouts: Time-Volume-Momentum RelationshipHi fellow Thanks for your response to my last post in which we discussed what happens after a breakout. In this post we will discuss better ways to anticipate a breakout. Although the types discussed are ideal that doesn't mean they are not possible in real time. That's why I have been posting some examples. However, anticipating a breakout does not mean that it will surely happen and you would end up in profit. That's the harsh part of trading and we should accept it. The least we can do is to have a plan and execution of that plan. These types of breakouts are common on lower time frame charts. But if and when they occur in larger time frame, their magnitude and effect multiplies. Rest of the notes are on the chart. Have fun. Your likes are the only motivation to post better analysis in future. Trade safe, stay healthy Best Regards Afraidtotrade
NSE:NIFTYEducation
by Bravetotrade
23