Trading Failed Breakouts

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When casually observing the markets recently, anyone with a single firing neuron can recognize two things are happening:

  1. The market is making a moon shot.
  2. A crooked scheme is being implemented in the highest reaches of government and the banking system.  Fraud, deception, opacity, and tape painting through liquidity injections represent the modus operandi of our leaders.

Da' Boyz have gone "all in" during this historic period, so extreme caution must be used if trading counter to their wishes.  We all know their shenanigans won't last forever, and when the tape turns south it could get ugly in a hurry.  Getting on board the train once it's left the station will prove risky, since violent rallies from dip buyers and POMO stooges often materialize, wiping out precious capital.  The strategy I use during bear market rallies to time short positions is a simple failed breakout entry.



Failed breakouts are a nice technical entry.  The risk is well defined, and a comfortable stop can be placed.  At a minimum, failed breakouts increase the odds of a successful swing trade.  With any entry, false signals and whipsaws are frequent (especially lately), but setting your stop and sticking with it has minimized this problem.  It's wise to take partial profits at achievable positions so that stopped out positions still yield some gains.  Don't be too upset if you're frequently stopped out, because the losses are small and the gains are potentially quite large.




Many etf's have recently made new highs, I'll be looking to add short positions if they fail.  I recently added XLF on such a setup.


Thanks, fellow Slopers, and thanks for all the concepts and ideas you've shared.  I'm very happy to write for such an intelligent group of traders.