False and True Breakout Patterns - forex gold trading signals

False and True Breakout Patterns ~ forex gold trading signals

Euro Dollar Breakout

False and True Breakout Patterns

On the weekly time frame we see that EUR/USD closed right at the weekly trend line (respected it). However, it is unclear how strong the support from the weekly trend line (low from June 2010 and January 2012) will be during the next weeks.

Weekly Support Resistance trading

Timing of the Breakout

On the 4 hour chart EUR/USD strongly bounced back from the support zone at 1.2641 and in the following EUR/USD moved up to each resistance level (EUR/USD Market Update 18.05.12), touched it (respected it) and broke each resistance level in the beginning of the succeeding 4-hour candle (Timing) (see also 5 min chart below).

Finally, EUR/USD moved up to the weekly trend line (orange line) and found resistance there, also due to the 61.80 % fib retracement of the recent swing down at about 1.2783, daily R2 and the 100 % fib extension from the recent swing up from 1.2641 to b at c at about 1.2790 (see 5 min chart).

4 hour chart V shape turn around Trading pattern

Breakout candle

On the 5 min chart, we see that all three breakout candles occurred in the beginning of the succeeding 4 hour candle (12, 4 p.m. 8 p.m. Timing) after each prior 4 hour candle touched the resistance level. The breakout of the breakout candle 2 did not get confirmed on the 5 min chart  so that in the following price moved back in the consolidation. Another nice three wave consolidation took place before the next breakout occurred. Finally, EUR/USD closed around the weekly trend line.

5 min false and true breakout chart analysis

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Trendline break - free forex trading signals sms

Trendline break ~ free forex trading signals sms

Trendline Break Confirmation

Understanding price Breakouts

Daily 10 Moving Average SMA

On the daily chart (left) we see that EUR/USD found resistance at the 10 SMA and monthly S2 so that in the following price dropped down.

1 hour Technical Chart Analysis Forex

SMA Trading

On the hourly chart analysis above we see that the 200 SMA also provided resistance in the same area like the daily 10 SMA. EUR/USD only made a slightly higher high yesterday at about 1.2825 (stop fishing) whereby the 5 min  breakout candle at 8.50 p.m. did not get confirmed due to the missing close of the succeeding 5 min candles above the high of the breakout candle (not shown).

EUR/USD dropped down from this high (point A) and found temporary support at the 20 SMA (purple line) and the prior consolidation price zone at point B. In the European session market broke through the 20 SMA and touched/ respected the red trendline with the 9 a.m..hourly candle (red circle). With the beginning of the next hourly candle (10 a.m.) market immediately broke through the now weaker (after the hourly touch-Timing) trendline-support at 10 a.m. after the small consolidation (see 5 min chart analysis) finished with the start of the new hourly candle (10 a.m.).

In the following, EUR/USD formed  a 3-wave consolidation (green circle on hourly chart analysis) at the 20 SMA on the 4-hour chart (not shown), daily S1 and the 161% fib extension from A-B at C (hourly) at about 1.2739 and the 61.80 % fib extension from A-B at C (5 min chart analysis) before price broke through it with the developing of the new 4 hour candle at 4.p.m (not shown). EUR/USD went down to the next support level at the 61 % fib retracement at 1.2712 and the 100 % fib extension from C-D at E (hourly chart analysis) where price currently consolidates.

5 min technical chart analysis forex euro

 3-wave consolidation

On the 5 min chart analysis above we see that the recent 3-wave consolidation (DEF) (green circle on the hourly) formed a lower low (E) and  a higher high (F) in the consolidation. This kind of consolidation pattern is very often followed by a strong wave in the trend direction (down) as many breakout-traders got trapped (E, F) in the wrong direction, which often fuels the momentum. The small bear flag on the right of the 5 min chart analysis was the respecting of the green trendline in particular and the consolidation (circled) between 2 p.m. and 3 p.m. before price resumes the downward trend.
The breakout candle 1 at 1 p.m.breached again the weekly pivot point but  the breakout did not get confirmed on the 5 min chart (point D)


Update: The recent downward move started at 8 p.m. after the 61.80 % fib retracement at 1.2712 was respected by the 4-hour candle opening at 4 p.m.. With the beginning of the new 4-hour candle (opening at 8 p.m.) the underlying support zone got weaker (61.80 % fib retracement got already touched) and price broke through it after a nice 3-wave consolidation on the 5 min chart between 7 p.m. and 8 p.m. just before the 8 p.m. 4-hour candle opened..

Trendline break on the 16th of October

EUR/USD confirmed the break of the hourly trendline

The Euro confirmed the break of the hourly resistance at 1.2991 (blue line) and the daily R1 with the beginning of the new hourly/ 4-hour candle at 8 a.m. (Timing Setup). The 100 % Fibonacci extension from the recent swing up (11 - 12th of October) moved to the daily low of October 15th (Yesterday) provided resistance so far at around 1.3057.

The 1 hour Euro Chart analysis below also shows a Butterfly sell pattern, important Fibonacci support and Fibonacci resistance at the 61.80 % and 100 % level.

1 hour Trendline break confirmation

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Gap Trading and Fibonacci Analysis - free forex trading signals indicators

Gap Trading and Fibonacci Analysis ~ free forex trading signals indicators

Fibonacci levels

How to trade a market gap

After the recent price rejection and the taking out of some major market lows (EUR/USD Market Recap 23.05.12), the EURO consolidated in the price range zone around 1.2550 during recent trading days (see 4-hour chart). The recent market low from Fridays trading session at 1.2496 occurred at the 100 % Fibonacci Extension from A-B at C and the round number -1.25 (4-hour chart).

4 hour EURUSD  Market Gap Trading

1 hour Forex  Market Gap Analysis

The pice gap down

The EUR/USD market gaped up and found resistance at the market low from January 2012 at 1.2625 (pink line). Market price slightly penetrated (3) the high from the 24th of May (stop fishing) at 1.2620 before market price turned around.

On the hourly chart, the circled consolidation during the Asian session (2), the 20 SMA (hourly-purple line),  daily R1 plus the 200 MA on the 5 min chart held the market for a while before EUR/USD broke down at 2 p.m. (5).

Market respected (hourly close at) the support level of the red line (market low from May 23 on the hourly chart), the green trend line at 1.2545 (hourly chart) (4) and also the 61.80 %  Fibonacci Retracement, 100 % Fibonacci extension, the daily pivot point at this support zone (red circle) before market price went down a bit further immediately in the beginning of the new trading hour at 3 p.m. (Breakout Timing). However, market price seems to consolidate around this key support level and might calm down on todays US Memorial day.

Fridays close at around 1.2518 (Market gap close) and the surrounding consolidation (1) might provide some further support.

5 min Euro US Dollar  technical chart analysis

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False True Breakout - free forex trading signals update hourly

False True Breakout ~ free forex trading signals update hourly

True or False Breakout Trendline Break

Breakout Candle Confirmation

Weekly Support/ Resistance Forex Trading

Trendline Analysis

On the weekly chart we see that we breached the weekly low at 1.2588 in 2010 and the January low 2012. The recent trendline (green) could not hold the market after the trendline got respected last week. 

In general a trendline is stronger when the test of  it is not so early after the trendine got created. In this case the trend line came into existence due to the January low 2012 combined with the low in 2010 and the trendline got already tested in May 2012 (much to early to give strong support). EUR/USD is now clearing the stops below these lows.

Daily Head and Shoulder target

On the daily chart we see that market reached the classical Head and Shoulders target (see also EUR/USD Market Analysis (15.05.12))  at about 1.2554. Furthermore this price zone is likely to provide some support due to the 161% fib extension from C-D at E, the 61.80 % fib extension from E-F at G. The clearing of the stops under the recent lows is a typical target of price movement and can give some support - manipulative stop clearing accomplished.

1 hour Trendline Break Signal

Breakout Trading 

The Difference between true and false breakouts

We had a similar consolidation (blue circle) like yesterday (EUR/USD Market Recap 22.05.12)(green circle). Both 3 wave consolidations had a lower point B and higher point C, which often precedes a strong trend continuation. Point B slightly breached the recent lows (blue and pink line) and the weekly S1, monthly S3 but the hourly candle closed at the monthly S3.

So the first breakout lower failed (5 min chart) and market moved up to point C slightly above point A. This false breakout caught many breakout traders to early who had there limit orders below the low of yesterdays strong daily downward candle.

However, market did not confirm the first breakout and turned around at the recent lows + the weekly S1, monthly S3 after the slight breach at 9 a.m. GMT and closed above the recent high (point A) to trigger some of their stops (point C). At point C market finished the 3 wave consolidation at the resistance of the 20 SMA (purple line) and went down for the second true breakout.

In the Asian session at 1 a.m. GMT the monthly S3 got already touched (weaken), which increased the chance of at least a breach of this level.

The 2 p.m. hourly candle respected (closed at) the monthly S3 just before the true breakout occurred (Breakout Timing). The  decreasing 10 and 20 SMA (red and purple line) also provided resistance and pushed price down.
 

5 min True/ False Breakout Confirmation

On the 5 min chart we see that the breakout candle 1 at 9.10 a.m. occurred just after the prior 5 min candle touched the low from 18th of May (blue line). However, this breakout (blue line) did not get confirmed and market also did not accomplish to close below Januarys low (pink line) so that market reversed and triggered some stops of the breakout traders by creating the new high.

However, the false breakout weaken  the the confluence support level of the monthly S3, weekly S1, daily S1 and the lows of the 18th of May and January due to the breaching so that the second breakout had a high chance to break this support level.

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