Breakouts and Fakeouts

The move that matters, and the one that traps you.

A false break: through the level, then straight back level broke... on thin volume and failed Every level that everyone can see is a level everyone is watching, which is precisely why breaks of it so often fail. Price pokes through, triggers the orders sitting above, and then collapses back inside, leaving the people who chased it holding the top. A break worth trusting Strong close beyond the level, heavy volume, and it holds on a retest. A break worth avoiding A long wick through the level with a close back inside. Thin volume. Nobody followed. The retest Price often returns to the broken level. Holding it confirms the break; failing it exposes the trap. The chart above is not a failure of technical analysis, it is technical analysis working: thin volume on the break said nobody was really there. The tools told you. Acting on the break anyway was the mistake.

Part of Learn NEPSE Investing, a free course on reading Nepali company accounts and charts. Section: Charts.