There are 1 or 2 stocks that have performed really well in the past 3 months that are forming a chart pattern that every trader likes to time the entry on the resistance breakout. However, It is dangerous to follow a chart pattern breakout in an uncertain market.
In order to sell their shares at the high side for profits, the big boys will create chart patterns to attract the majority of the traders to buy their shares. This is part of the reason why many investors always get trapped at the high price by entering with resistance breakout signals.
Usual technical analysis will not help you to identify whether the resistance breakout will fail or be successful, even if you combine it with indicators analysis. It is because of the analysis investors interpret the stock price doesn’t tell you whether the big boys are trying to trap you with breakout. All we learn from is breakout entry, wait for price to hit your take profit or cut loss. We won’t know whether the resistance breakout will be sustainable or not.
We will share some price & volume movement that shows whether the price up is sustainable or “ITS-A-TRAP”.
Most technical analysts (including investors who learned TA) in KLSE don’t analyse the 5 mins chart. Because there’s nothing for them to see in the 5 mins chart, it doesn’t have a proper candlestick formed, indicators reaction to the price is too sensitive & so on.
Here is the difference between how we analyse a stock compared to the 90% of the investors in the stock market. The 5 mins chart is one of the data that shows us the most information of the next price move.
If you look into the chart above, it is an ascending triangle breakout but the price falls the next day. If you have enough of getting trapped in a breakout fail, try to look into the 5 mins chart of the breakout day to see whether there are any of the price & volume movement that shows the big boys have no intention to mark the price higher like the chart below.
Most investors will miss out some details when analysing the price in a 5 mins chart & focus on the high volume price up in the morning, investors will perceive this as bullish. However, these volumes & price up was created in the morning, big boys selling shares with “Pump-N-Dump” will also create high volume.
These high price & volume is just the bait to attract the retail investors in. The price & volume we need to analyse are the one after the high volume markup. This will show us the big boys whether they will sell or continue to markup the stock price after the breakout.
Big boys usually will not mark the price up when they find there are investors parking their shares at the lower buy price. They will know there are enough buyers in the market for them to distribute their shares for profit. Therefore, they will maintain the price at the same level, while creating frequent buy transactions to give more “confidence” to the retail investors to enter into the stock.
When you notice there is a high volume with prices not marking higher or price stays the same at the peak of the day, you know the big boys are getting ready to slaughter the “sheeps” the next day. Which means the resistance breakout will fail.
By knowing how to look into the short term price movement with a 5 mins chart, this is how we can avoid entering into stocks at the high price & entry at a lower price when the big boys are ready to markup the price again to attract investors in.
If you are still interested to find out more on how to identify the price bottom before the big boys start to markup the price to attract buyers. Register an account on our website to watch our recordings on “Advance Technical Analysis to identify precise rebound for KLSE”.
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