The price formed false breakouts (1) of the 1,200 round level on April 14-16, 2021.
Then, a true breakout took place. By the way, note the false bearish breakout, marked with a red arrow. Such local breakouts often confirm the true nature of a more global breakout in the opposite direction.
The price consolidated above the 1,200 level during the following days. Traders received the facts, which confirmed that bullish moods dominate in the market, because the price increases, and whatever trend indicators you take, they will show buying signals.
If you take the confirmation that there is an uptrend in the market as a basis, give preference to false bearish breakouts. A good entry point was not long in coming. The false bearish breakout of the April 21 low took place in the market already on April 22 (3).
Another case was on May 5 (4). The price ‘looked’ under the 1,200 low in order to hook the stop losses, ‘hidden’ there. When there is an uptrend in the market, the buyers tend to increase their stops (the trailing tactics). Use it for your benefit: false bearish breakouts in the growing market context is a way to enter a trend when others are forced to exit from it.
If you assess false breakouts in the acting trend context, instruments for building the market profile can help you. As you know from the auction theory, Steidlmayer and Dalton studies and articles of the market profile researchers, the price development could be split into 2 stages, which interchange in the endless cycle:
trend → balance → trend → balance →…
The following will be formed on the profile:
- Bell-shaped bulges when the price is in the balance.
- Thin (narrow) profiles when the price, during a trend, advances to new balance levels.
You can study this topic further in the following articles:
We will illustrate our advice using a practical example. Below you can see a daily GBP futures chart.