False breakouts and stop loss placement

[notting]

Volume was deminishing on it's subtle rise before the break down.
Volume's up whilt trading below that recent short term rise so I'm still negative on that new inside bar even though it finished on it's high.
Would like to see opening prices.
Still not tradeable.

 

[Mistagear]

Here is another to help with the analysis.----next bar actually and a little more white space below to help SKC

View attachment 44305

Howdy,

I would normally like to see a little more background to assess where in the cycle this particular formation resides, however my read of the information supplied,
The largest volume spike shows high demand met with supply which succeeded in pushing price below the initial upthrust.
A second drive higher through a sustained push (elevated vol levels)shows another occurrence of supply being the greater force and weakening the ability of bulls to drive higher.
From that point onwards (second highest blue volume ) volume spikes resulted in decline in price a sign that demand is weakening.
Next feature is the red volume spike where supply forced price back down to the horizontal support line, so supply now exists in numbers down to the support, a continuing weakening of demand.
Declining volume in the several bounce attempts shows demand almost exhausted, culminating in several extreme low volume days where demand appears almost non existent.
Supply returns having been unable to fill at the higher levels and price breaks down through support.
The second chart with the added bounce shows the attempted rally but given the backdrop of continued supply at lower and lower levels prior, my guess is trend continuation due to volume not supporting price, with a stop above the last no demand bar.

PS, unable to supply a visual overlay to mark tech's chart, apologies.

 

[Chalea]

Here is another to help with the analysis.----next bar actually and a little more white space below to help SKC View attachment 44305

 

[tech/a]

So some very good responses here and I agree background is very helpful.
On to the next chart a continuation of this chart a bit further along.

We can now clearly see this was a false breakout. (20 bars back)

Still a little more history was this a true or false breakout.
Remember with History sometimes we dont have the luxury of 1000s of bars data.
A lower time frame tick chart basically starts from the first bar of the day!
AND that's where a lot of the action takes place.
There are 3 more so wont place commentary until after.
Then we will have another go.

 

[pavilion103]

Tech, I'm not sure if this has any relevant but I noticed that the close of the ultra high volume blue bar in the background is the same as the high of the very high volume wide-spread red down bar which started the current range. Does this mean that there is a lot of resistance in this area?

There was high volume in the 2 bars prior to the current one. Does this suggest some accumulation? With the current bar closing on the high it would suggest that most of the action the previous day was buying. Is this correct?
However, what scares me a little is that today's break is on below average volume.

Just taking a stab at it!

 

[Gringotts Bank]

Upwards breakouts work when:

1. there's volume to support the move.
2. The breakout occurs without too much waiting. If the SP has to creep up onto the neckline/resistance, there's hesitancy and it will fail or be delayed. If it's a triangle type pattern, the break should occur 2/3 the way into the formation for best performance, not near it's end.
3. the Ords is bullish.

eg. IRN I bought yesterday because of the absolutely perfect formation the inverse H&S. It also matches what the Ords is doing in terms of it's pattern, which is bullish. The break hasn't happened today. Not enough volume. Needs about 3 million shares traded to breakout convincingly. I can take a loss now or bank on a delayed breakout late today or tomorrow. Most of the boxes are ticked. Ords gaining strength now.

The moment my sell on IRN gets taken out at 37c, it appears immediately back on the scanner as a buy. Still feel volume is a bit low so I won't re-enter.

 

[craft]

The question for the chartist is is this a true or false break.
Through analysis present evidence to support your view.

I have included stochastic and volume only.

View attachment 44299

Can an Investor have a shot

I think both breakouts you refer to in the charts are true. They undeniably occurred. If they were your signal to act then you should act and re-act to whatever follows

The real question should be whether a straight price break signal is a good entry signal or should it be confirmed by another trigger (volume, divergence, the next bar whatever) . I accept there are ‘failed’ patterns but your adopted trade entry signal/trigger can never be false. It may not work out, but that doesn’t imply it was false. The distinction is critical. By all means try and find better performing signals outside the heat of battle but don’t let this interfere with obeying your signals when trading.

It’s only after many occurrences that you can judge what a good or bad trade signal is. Looking at individual events and labelling them as false is to me potentially dangerous territory. From what I have seen price breakouts never have had a high success rate but if you take ones that offer appropriate, close stop levels you can manufacture high win/loss ratios to compensate. But I rarely trade anymore so maybe things have changed.

 

[tech/a]

Craft

Yes true but every trend starts with a breakout.
Anyway I'll leave the thread as there doesn't seem to be a great deal of interest.

Takes too long to stuff around with posting if I'm just doing it for the amusement of a few.

Have a good weekend.
FTSE is crapping nicely

 

[Wysiwyg]

From what I have seen price breakouts never have had a high success rate but if you take ones that offer appropriate, close stop levels you can manufacture high win/loss ratios to compensate.

True from my day trading experiences too. One has to have the other breakout traders and day traders involved. You want a good number of bulls that are well endowed financially to be on the (long) breakout otherwise things can fizzle out quickly.

 

[AlterEgo]

Ok, I'll take a stab at the last graph. I'd say the breakout is TRUE. That resistance line has been very strongly defended in the past. Stock has hit it 11 times without being able to break through. This is the first day the stock has managed to penetrate it. Current bar volume is moderately high and closing on the high. Previous failed breakout downwards gives additional support to the upward breakout being true - stock doesn't appear to want to go downward, therefore path of least resistance is upwards.

However, these graphs are looking at it after the event. I mean, if you were trading the breakout, you'd already have a position on that breakout bar. I wouldn't be waiting for conformation as to whether the breakout was true before entering, as it's often too late by then. So I'd be looking at those above graphs from the perspective that I already held a position in them and whether the current price action suggests that the breakout was false and therefore I should exit. In the above graph I see no reason to exit the trade at this point. Anyway, that's my take on it.

 

[pavilion103]

Craft

Yes true but every trend starts with a breakout.
Anyway I'll leave the thread as there doesn't seem to be a great deal of interest.

Takes too long to stuff around with posting if I'm just doing it for the amusement of a few.

Have a good weekend.
FTSE is crapping nicely

Can we get the answer for that last chart? I am very curious!

 

[Wysiwyg]

WTF is this stupidity then. The unemployment numbers in USA are subdued and the initial reaction on the FTSE is up for what reason f knows, followed by the true movement down. Can anyone tell me what happens here please??

 

[skyQuake]

WTF is this stupidity then. The unemployment numbers in USA are subdued and the initial reaction on the FTSE is up for what reason f knows, followed by the true movement down. Can anyone tell me what happens here please??

Ftse/s&p/dax all same.

Its been happening recently where I think big funds are 'gaming' the market.

Its a well known fact that people will place buy stops above mkt and sell stops below market to catch the inevitable pop when the figures are released. Most orders are in a few minutes before the release.
Thus it is a simple matter of buying a few hundred S&Ps at mkt seconds before the release, and set off a chain reaction of buy stops which you promptly cover into. If the release is better than expected, stay out. If its worse than expected, feel free to short, as there are a bunch of people who just bought the high and are left very high and dry.

 

[tech/a]

SQ
Nice reply

The best thing any discretionary technical trader can do for their trading is learn how to read the right hand edge of a chart.

I was hoping in this exercise more would have a go --- some have and some good comments have come back.

To be able to look into a consolidation area and get on the right side of the inevitable breakout or to be able to read a move and know with a good degree of confidence that you should stay or leave a move is not only profitable but invaluable in all markets.

 

[Wysiwyg]

Its a well known fact that people will place buy stops above mkt and sell stops below market to catch the inevitable pop when the figures are released. Most orders are in a few minutes before the release.

Yes that play also stops out shorts before resuming trend. I do know better.

 

[tech/a]

Yes that play also stops out shorts before resuming trend. I do know better.

Was that last night?
I cant see it on a 1 min?

 

[skyQuake]

Was that last night?
I cant see it on a 1 min?

On FTSE and S&P (1min charts see attached)

 

[Mistagear]

Was that last night?
I cant see it on a 1 min?

The upthrust of 9.5points took 4 seconds and the down of 16points took 5 seconds.
I wonder how much slippage in that little lot.

Cheers, M

 

[tech/a]

This is my 1 min chart



Data E signal.-- 23.30 Time

 

[skyQuake]

This is my 1 min chart

View attachment 44352

Data E signal.-- 23.30 Time

Should be 10:30 tech, 11:30 is US open