Trading False Breakouts and Breakdowns // stocks day swing traders


Trading False Breakouts and Breakdowns // stocks day swing traders david moadel welcome to looking at the markets with
David Modell today I wanted to talk about false breakouts and false
breakdowns let’s take a look at what I’m talking about
we have a one-minute candlestick chart for Home Depot stock and the examples
today will all be one minute Candlestick charts which day traders often use but
the principles I’ll be talking about in this video can also apply for swing
traders for example with a daily candlestick chart ok so we can see on
the one-minute candlestick chart the price of Home Depot stock went up to a
particular level here and then it bounced off of it bounced down off of it
so it’s starting to form a resistance level here and then it comes back up to
it and it can’t get past it so now it’s an even stronger resistance level and it
breaks above it so some chart people would say well it broke above it and so
therefore it’s going to go up they would call that a breakout but you have to be
patient you want confirmation make sure it really is a breakout because the
market will give you head fakes this is a perfect example of a head-fake look at
that classic head fake came above and then look at that red candle definitely
not a breakout it’s a breakdown and when you see a candle that size what more
confirmation do you need and so there it went down down down down down so there’s
the head fake and then there’s a very convincing candle to the downside and
down down down after that so this would be a false breakout and when I see that
I can take a position could possibly take a short position
although you want you want to be very careful with short positions because if
you’re wrong about your short position you could incur a very heavy loss so
please be careful with short positions so that’s an example of a false breakout
there are also false breakdowns so for example this is Pfizer stock the
one-minute candlestick chart thanks to trading view calm for
providing these charts want to give credit so we see the price action went
down to a certain level then bounced off of it and so it’s forming a support
level here and then it goes down to that same level again and if you see the
shadow or wick of this candlestick it looks like it’s breaking down below
that support level and some people might say well that’s going to go down more
because it’s break down below the support level but again you have to be
patient you want to be patient see if it’s a head-fake or not and here it is
another head-fake went down below that support level and then came right back
up and it went up past this resistance level up and up and away another
textbook example but in this case it’s it’s not a false breakout it’s a false
breakdown and I might take a long position here after the candlestick
price action shows that it is in fact a false breakdown and when it went above
that resistance level that confirmed it even more here’s another example this is
visa stock the one-minute candle candlestick chart and it came down to
this level then bounced off of it forming the beginnings of a support
level came down to it again we can see if we look closely on this candlestick
went down below it don’t be fooled some people would say oh it broke down
that support level clearly it’s gonna go down clearly it’s a breakdown nope head
fake false breakdown we could see it coming right back up you want more
confirmation you could wait until it goes above this level which it did and
up up and away a nice profit for people who took a long position and a lot of
heartache for people who assumed that this would be a breakdown just because
it went below the support level doesn’t mean it’s a breakdown nope I look for
those head fakes I hope you do too so don’t let the market head fake you be
patient wait for confirmation that it really is a breakdown or breakout check
for the head fakes and see where it’s really going I hope this was helpful to
you my name is David Modell if you have questions if you need more help with
trading investing charting whatever might be stocks options crypto
currencies commodities you can email me anytime my email address is David Modell
at gmail.com and if you liked this video please give
it a thumbs up on youtube leave comments and please subscribe to my youtube
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updates on my financial educational videos thank you so much for watching
and listening and I’ll talk to you again soon

2 thoughts on “Trading False Breakouts and Breakdowns // stocks day swing traders”

  1. Another great video. Concise, specific to the topic. Thansk a lot! More day- trade long & short strategies, please!

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