What Are Failed Break Outs?
Lets Talk Levels
Today we discuss when and why Failed Breakouts
But first lets look at a recent failed break out that I called out on the Youtube live stream today 9/17 that I created intra day and executed and how it fared up the rest of the session!
IF you wish to watch me live the link is below, I trade live everyday for the first 3 hours of the NY Open!
If you are a consistent reader you know “Rick Trades Reversals” and with that being said I often naturally gravitate towards this form of trade as it suits my personality and naturally am a contrarian at heart.
In order to proper identify the landscape (environment) when failed break outs or even failed break downs occur they are best suited when the move in any given direction is “stretched” in one way. How can we characterize a stretched move you may ask?
Simple answer is after more than 3 green or 3 red days in a row statistically we are going over board and since markets are mean reverting they often do tuck back and start the infamous back test of price levels process.
Now 3 straight days in one direction don’t automatically result in failed moves right off bat, we need confluence and structure in order to validate these moves.
A failed move has many characteristics and they don’t all have to happen but we do need min 3 of the symptoms to occur in order to even begin to plan for one.
Price is moving up/down viciously (this kind of price action creates FOMO)
Especially after 3 straight days of trend moves
A new high or low must be taken (the higher the time frame the level the better)
Is the level broken a prior monthly / weekly / overnight / daily / 2-3 day high
The bigger the zone the bigger the failed move (reference 8/26 - 9/2 zone for measured move example)
Price must reverse the break of price and find “acceptance” below or above the zone
9/17/2024 Todays intra day plan had exactly the 3 symptoms needed to validate although it was a puzzle and price did not immediately break and flush it took sometime and resulted in a ~45 pts move on ES.
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