Today’s lesson we are going to talk about fake out breakouts. Also known as FOBO. Basically, what it is, is a breakout that does not work out because usually when you have a strong area like here, we have a really nice, strong, solid support area.
And when you have a breakout, the hot the probability of the trend continuing in that direction is really high. However, there are anomalies to this and they are called fake out breakouts or fake bear runs, fair fake bull runs when it continues in the same direction.
But it fails. Chances are they’re really difficult to understand and to get on. However, what the last thing you want to do is if you did enter a trade continuing and it fails, you do not want to re enter that trade because that is the end of it. So right here we have a solid support area and then we have quite a lot of strength right here with a breakout. Right?
I mean, I’m seeing really nice, strong bars. So to me, OK, it’s been running down the whole day. The whole day has been a down. It failed to go up here. There was a resistance area and it continued and in breakout. So in the live market.
That’s right. So in the live market, this is what we are seeing.
Bam! So when I see something like this, it’s a nice, strong run. It’s a nice, strong break.
I want to put in my order waiting because this looks like a break, right? So what happens here? It does a nice rich race and then it continues up. It fails. Right. So in this respect, I would not continue going down.
I would actually sit back and just let the market tell me what is going on. This is a fake out breakout. It does not continue in that direction. It was just you know, it’s just how it goes. There are times when these things happen. Here we have another perfect, perfect example. The market has been going up and it has now reached a pretty strong resistance area. All right.
It is headed one, two, three, four, five, six, several times. Right. So as I’m looking in the market, it has been growing up. You see the market has been going up. It did fail to go down. So now it’s continuing up and it’s hitting this resistance area.
At this point, I’m just sitting and waiting to see what’s going to happen. And it did a nice, strong break down. So this case, I would probably be looking for entries now. The market has a really high tendency to re hit the areas that we visited.
The resistance areas can continue even if the trends change. Right. So here again, we have now come back with a lot of strength back in the up direction and it totally broke my resistance area. So what this shows me is that look at this, it’s actually even hit this area down here that it has failed to go down. Right.
So now because of the strength and totally bring out my resistance, I would be very interested to see the market continue up.
All right. So I would be looking to reenter some place. These are my areas to reenter. This didn’t hit it. And look what happened. If I was here, look what happened. It totally flies back down. So this is another perfect example of a fake out breakout, a broke through this resistance area and it did not continue. It now is heading down. And actually, what is starting to give me now is a channeling market, and that’s a different, completely different lesson.
However, we want to focus on what fake out breakouts are and they happen. And if they do happen, just remember not to re enter, to go in that same direction and to learn to read the market if you have got any here and it stopped you out. Those things happen. That’s just part of trading.
However, breakout trades are very high probability and I would really continue focusing and learning more about breakout trades. Just remember, there are always exceptions to the rule.