Fakeouts - Continuation Is Never Clean | Supplementary Material

Alright, so here we have three separate charts.

Each of these look in the beginning pretty similar. So we have a major impulsive move up, we form a high, we form a low and then we're consolidating within a range. So for each one of these, first impulsive move up a second impulsive move up a third impulsive move up, you have three essentially three moves up. Alright, and after that we're again consolidating within a range. This is another impulsive move up, consolidating breakdown slightly. Still consolidating, moving sideways within a range.

These are all initially what started up as strong uptrends. Only two of them went on to continue upward. Alright, now in the beginning it's hard to distinguish one from the other. Maybe with exception for this one because we have these three impulsive moves right after each other. But if I just kind of included this portion of the chart moving forward, these would all look pretty similar in that they're just prices stuck within a range. Alright, so trending markets, continuation, whether to the upside or to the downside, it's not like it always looks like. It is convincingly the case that it's clearly only going to go in one direction. Next, there's a lot that takes place within a range that is one random because of the stochastic price, rather stochastic behavior of price. But there's also behavior that is influenced purposefully with the intention of say if we are in the beginning of an uptrend or a markup. There are certain things that.

Traders will or large entities will practice or exercise to try to get the weaker hands out of position.

Large traders know that if they create a panic, they could force more smaller traders to give up their position, sell their Bitcoin. You've heard of this before. This is not just kind of that woo woo narrative of strong hands. This is a reality. This is how markets work. If you're large enough, if you own enough of a particular asset, you have a larger influence than a smaller participant and it might not cost you too much money to exercise or wield some of that power. So there's many times when in the beginning of an uptrend there will be, let's say if we've been moving sideways within a range for a prolonged period of time, there will be something that you know, it is the beginning of the move out of the range. Let's just say for example, you know, we're in a range and for a long time we've been kind of ping ponging within this range, right Each one of these tops is kind of look the same. Okay. So the first move outside of the range, it's going to have the same top as all of these with slight differentiation. So it's going to be difficult for us to recognize whether or not this is the first markup out of the range or this is just a deviation above the previous highs. So there are certain things that we can look for. There are certain things that we could come to expect. What you want to be able to do is to be able to spot strength in price action. So you want to be able to spot strength in price action in that there are certain patterns in candle behavior. There are certain candle bodies, obviously candlesticks, that either indicate weakness or strength. And obviously when these things happen in succession, when price continues to press in a direction or grind in a direction, that's the moment when we want to be on that side. So be on the side of strength. So in this first example we have, this was a considerable move up. We form a high, we form a low. So just to mark out some areas on this chart, if you want to just say this is the high from a wick standpoint, I'll just say this is a low from a wick standpoint. And then you can see that we're pretty much respecting this portion to begin with. Extend this forward, I consider these the highs. This is a one hour closing basis. So it's not like it's going to be perfectly clean. But I'm just trying to convey an idea here. So here's your volume profile for the structure all the way up until actually this point. Okay. So you can see that this is the point of control right here. So this is the structure for what we painted a majority of this area, or rather what I've painted within a majority of this area. So this is the beginning of something that ended up moving upward. So there was though this period when that seemed doubtful. So when it comes to a range, one thing that we want to identify is where the key points of structure are within the range. So in this case I'll just box this area. So from low to high, essentially this is basically the high. I didn't draw it perfectly, but we'll just do it again and then we'll say here's the point of control, okay, Major area of volume. And that started up till this point. And then the midpoint between this area, okay, if you want to use the value area, so which starts right here to right here, the midpoint between that area is going to be right about Here. So within a range. All right, within something that precedes a markup or markdown, there's a. There's going to be certain behaviors that occur that are meant to essentially test the other side of the market. Sometimes you'll have traders that are. Or large participants that are overly confident. They get a little cocky and they want to try to force the market around. So, for example, this is what looks like a nice retest. So if we just look at this right here, it looks like we're having a rounded bottom retest, some strong candle bodies upwards. We come and test the top side of this portion of the structure before we ultimately come down. And it looks like we're beginning to test what is the midpoint. So all this looks like it could potentially be setting up for continuation. But then we come up here, we definitely take out the high that was over here by some margin. But this is only a half an hour chart. Actually, this is a half an hour chart. So this is not like this is the epitome of a swing failure pattern. But nevertheless, we are rejected from this point all the way back down to the other side of the range. Okay, so price actually opened up here.

Moved up, was rejected all the way down here, and then closed over here.

When you see that price comes up here and is rejected in a very violent and forceful fashion, it comes all the way to the bottom of the range. You might immediately be thinking, yeah, this is the fake out that we spoke about in the other video that when you take out stops up here, you take out their orders over here to buy, to cover shorts. So you have no more buying pressure over in this area that would have been built in if you had a short opened up over here and it got down here. Because if they're stopped out, they don't have a position open over here anymore. So you might think this is a fake out. But one of the most important things is if you are outside the range, if you have a deviation outside the range, where do you sit when you come back? Within it. So as you can see, we might have came all the way down here, back up here. Okay. But we are still above the point of control. Still above the point of control now. And again, it looks like we're beginning to put in that strong price action. Candle body, rounded bottom. Okay. Putting in that rounded bottom, we hit again, a little bit of resistance up here. But all of this is starting to grind its way upward. So it's starting to grind its way upward. And you can imagine that anyone who saw this over here, this major rejection right here, they're likely thinking that this is absolutely going to break and travel downward. So they're positioned short. Some might be from the middle of the range, some might be from the high, some might be from the lows. Looking to anticipate a further breakdown. So you have all of this buying powder built into this structure now. So when price action starts to grind upward, we see strength. You know what's going to happen eventually. Shorts are going to eventually close out manually if they're not ran with force. Alright. So one of the most important things is that, you know, we have a clearly defined range. Okay. If you just go from high to low to this candle, and even though this was rejected from the highs forcefully, we still came back and settled first at the point of control and then ultimately started grinding our way up to the eq, which is in this case, I'm talking about the EQ right here. So right in the middle of the value area, so you can see Price is stair stepping its way up. And a candle like this is a good indication because you have one of these pin bar, one of these candles with more of the actual wick than the candle body. This might not be specifically a pin bar because a pin bar is more or less going to look like this. So if you came down to the lows, a pin bar would look like that, or if you were the opposite and you went to the highs, it would look the opposite. It would look like this. Meaning that price made it up here, but buyers are able to push it down. So you have this strength that starts being pretty obvious. So within a range, until the range is deviated and respected on that side of the range. So if we had been rejected up here, came down here and then found some type of resistance towards the low portion of the range, alright? So you can see initially we have it up here at around the midpoint. Okay. But again, price comes down here and finds its footing. So this is reason to not get in position one around this area to begin with. Okay. Because you could see that this is the midpoint. And even if you saw weakness over here, it eventually found its footing and again started to grind upwards. That grind towards the top after being rejected once. This is a pattern that bitcoin does a lot when it's being marked up. When bitcoin is making moves up a lot of the times what you'll see is there'll be a major move up. There'll be what is another attempted move up, a major rejection. It looks like it's going to dump and it comes back up and starts grinding upward. Now at this point, and at this point it nukes up to the next high. This is something that is.

Unique to Bitcoin in this regard. It's a pattern that's worth paying attention to. And sometimes you'll see in the other example, you'll see why it's a little bit more obvious. But nevertheless, what you need to maintain is the integrity of the range, which is still maintained. If you consider the point of control, you consider the eq, while we do come down here temporarily, you could see that there is strength down here. There's really no major cause for concern because these lows are maintained. Alright, so these lows are not only maintained, but you're starting to see they were having this higher, low, higher, low, grinding pattern upward. Okay, so eventually, you know, breaks through and it gets away from you. The first area that you come back to, as we previously mentioned in our last video, okay, this was resistance up here. So go figure. You pop through here, you retest it and then you leave. Okay, so the next chart is going to be a little bit more obvious in its tell in the tell of sellers trying to push this down, trying to scare buyers out, or rather anyone who is maybe potentially long trying to scare people out of positions to pick up supply, to pick up anyone who is currently dumping after having a major move like this. So this is another range, right? This is the value area of this range. Okay, let's mark out the EQ, which would be the 50 point between here. All right, so now we have that eyeballed pretty damn good. Okay, here's your point of control, which is up to this point. So none of this happened yet to paint this. So it's not like this is part of this. So we'll just extend this moving forward though, to show you. All right, now price makes a strong move upward.

By all means. We've been rejected multiple times within the range toward the highs. So everyone is waiting for that short opportunity. Okay, and for the short opportunity, a lot of the times, what do we talk about? We talk about having a range like this. And let's say you come up here, break down, and then you have some type of backside entry. You got to get in on these quick, but you get a backside entry, you get it below structure, okay. At least some point in the lower portion of the structure not where we currently are. So again, let me just redraw this because I forgot that I can't back up specific drawings with this drawing tool. There we go point of control, eq about halfway. All right, so what happens? Price is in a trend on a very low timescale. So it's higher, low, higher, low. Not a higher high. But this is after a major move upward. So trends are never extremely clean, or rather as clean. Excuse me, as you would see in a TA book, they're never just a flag that just looks like this and then just cleanly breaks out. And it's all smooth sailing and obvious signs. Okay, from the beginning, there is, or rather there are players that are going to try to throw you out of position. And this is that pattern again that I was mentioning in the last slide, where we come up to a point and then completely nuke through the bottom of the range, only to come back within the range. Okay. And a lot of times you'll hear people refer to this as it'll be like a scam wick on bitmax, because the wick will be much larger. Otherwise, it'll be a lightsaber or whatever. Darth Vader's. Can't think of what the lightsaber was with dual sides, but you get the idea. I'm sure if you're on Twitter, you've seen this before. Now, this tell is a little bit more obvious that this is trying to influence people out of their positions. Now, one, here's the low, the major low of this. You don't even need to go by the wick of this. This is obvious with your eye. Here's the next low. And right away you can see that we come down and we test this low. We don't break the low. We don't close under the low. We don't close near the low. We come right back above the point of control. That's. Even if you waited this long, though, a lot of people, they see this and they immediately sell or they immediately get out of position. One of the tells is that this rejection occurred before this high. So we talk about swing failure patterns and their function, and they're more useful on the higher time frame for people that are trying to take advantage of a lot of the supply of liquidity. But in this case, the stops that are up here were not hit. So it's not like we came into supply and were hit. This was someone trying to force price down before it broke. Maybe a key breakout point because the strength is on part of the buyer. Right now, this is strong price action up through this. So this is someone's last attempt to either fill more positions by pushing the market down or to stop this from passing through an area because they have a position that they need to protect. It's not like this came up into supply and was rejected. Someone tried to force this down before supply. So before we even got to supply, and that's your first sign. The high wasn't even taken out. And this was rejected majorly. So we come down to the bottom of the range and again we close back above the point of control. And then here's this drift again. Here's the drift, all right, that eventually, okay, you could see that we have a little bit of selling into this low. A little bit of selling and then immediate response on part of the buyers. And then again, what do you see? Okay, if we just. This value area again, moving forward, you see that we break out of this range and this is that grinding behavior too. Break out of this range. This one's a little bit more rounded. All right? But if you are rejected from an area majorly, okay, it's a bad sign when you're approaching that area right away. Again, okay? So it's different if you are. It's different if this is a resistance, okay. And you are, let's just say slowly approaching it for the first time after not testing it a while, okay. Versus if you are, have just been nuked from there. Excuse me, wrong tool. If you had just been nuked from there, okay. And then you're approaching it again, okay? Because this didn't do its job then. So this didn't do its job because price action buyers are still aggressive enough to bid this all the way up. And then the clear sign is right here. So this is your quintessential or prototypical. All right, Flip and test. So we break through, impulsively, retest and then leave. So this is, mind you, when we talk about backside entry, it's not like every time backside entry is going to look like this where you break down below and then you spend some time and then retest this. Now everyone has some time to get in, alright? Sometimes it's just the flip side of this, okay? The same thing you see right here, we poke through. Your opportunity to get in is on the retest right here. Because in this case, let's say that you're long at this point. You put your stop right here. If the chart was inverted and it was a backside entry, you'd put your stop within this market structure as well. You might put it right below if you're long. Right. Now, the impulsive candle that took us out of this value area didn't take us out of the range. But you could start to see that this grinding behavior, since it's already approaching this high, where we are rejected and yet didn't get rejected from supply up here, this being a trend that was the beginning of a move outside of a range that ended up continuing upward. And this again above here was where I looked for a short. This initial portion of it was strong, though. And if you guys remember, when I shared a chart on the Mighty networks recently and I showed that delta chart, this was, I believe, the lows that I was sharing, that I was saying that there was aggressive selling, but again, we were still pressing upward. So this right here is essentially a fake out by sellers trying to nuke this down to scare you out of position. So one of the important factors is that we didn't take out these lows. We didn't take out these lows. And when we did come down to test this area, we immediately came back above a key area within this structure. Now, this is all different from this chart. Here's a similar structure in that it's a range impulsive move upward. Here's your value area right here. Here's your point of control.

Point of control up until this point and then your eq. This range is going to be right around here. So I believe it's going to be right there, right around here. Because you can see this. This is playing a similar role. All right. It's not that that might necessarily be bounding off the area that I'm drawing, but I'm just trying to get an eyeball for this because I'm not using a fib with this drawing tool because this is not currently on trading view. So what we see with this structure is again, this is off of an impulsive move up. Okay. Impulsive move up. All right. In this case, decent rejection up here with these wicks. All right. And we don't spend much time towards the highs. We come back down and this is the first low. Really, because we didn't really have a low over here. Unless you want to count this as a low, put in a low over here. So you could say that this is high. This is low. Either way, you can see we're spending more time at the bottom. You might say that this is a rounded retest, but one of the first signs we have a major rejection. But as we talked about, this is great because as we mentioned, we have a major rejection right here. Okay. Mind you, the structure is different within this. So this is already starting to look bad because make sure I get my drawing right Already starting to look bad because here's your value area. This rejection is actually below this value area. So this is not the loss of the range though. So we lost the value area. First sign to pay attention, not the loss of the range. So you're not going to take a backside entry right here. The previous structure right below is right here anyway, so you're not going to be taking anything off of this. But what you can see is price comes back up. Test the highs again. And right at the highs we have your rounded retest of these highs again. Now in the other chart you can see that for example, we have a rounded looking retest over here. A rounded looking retest over here that looks similar to this rounded test over here.

With the exception that in this case.

While these candles might have shown some sign of rejection, we're still maintaining the 50 point of this structure. The first area we come back down and retest, we're successfully holding it. The 50 point of this structure, we are still kind of within. This is good. All right, this is a good sign, but this is something to focus on right here. So you have this candle that's rejected here. All right. This candle that does come off of the lows. While it does finish higher than here, it doesn't finish above this candle. So here's your highs right here. So here's your high at this point. Here's the area it's retesting. Okay. Which coincides with the major volume area within the structure previously. This is an area we came up to, rejected from, came up through, passed through it. Now we're retesting it, but the strength is starting to taper off. So you have to start to be able to identify and just through discretion alone, strength and price action. So if this candle, this candle has a decent sized wick at the top too. So not there's body, but there's a pretty high wick to the top side as opposed to the downside. And this candle right here, while it opens, in this case, it does open green, but it's white because it means that it opened higher, it doesn't break the top of this, this open. So it's not like we have a candle like this which would have been good. Or in any case, even if it was a candle that opened at similar height. Okay. Or some type of candle that did not close below or within this structure. And then the following candle, you see right away, you see this sign of weakness and we're falling right back down to the bottom of the range. So if we're rejected from an area like this over here and we come back through and then we start falling right back down at the bottom of the range. Well, the more time that you spend. All right, towards one side of the range. Okay, so you can see the volume point of control is in this structure. But prices battered the high, battered the high came up, all right, was rejected, but it's still pressing higher. All right. This while it has been at the highs, the point of control is within the center. And this is spending majority of its time towards the low. And here's the value area low again. And this is your tell right here that when it comes down here, you immediately start losing any signs of strength. Okay, so this looks like strength right here. You see this candle? This candle opening up above the high of this candle, this one rejecting the low. A little bit of a rounded structure here. Not that attractive because of this candle following. But this right here, we come back right down to the lows, fall right below the value area low and you can see it's starting to just die off. Starting to die off at one of your signs would be at this point is closing right through the low. So we close through the low. In this case, you'd have to take advantage of some type of breakout trade if you're looking to sell this to the last previous area where we left from. But you could tell how these structures look different and you can see what's important with fake outs. Did you come below the range? So it's not like, for example.

This is the low of the range. If this had come down here and then closed back above, there'd be a case to be made. You have shorts that are in here and they're stuck in position. Whereas this is very obvious that this never breaks this low, never breaks this low and immediately comes back into a major point within the range, which is the value area where it's accepted and starts making its way upward. So two things. This is a pattern that you're going to see a lot, especially in uptrends. And it's meant to throw you off the same way that it works in the opposite direction. In a downtrend, you're going to have movements that are basically, you'll have traders that are going to make it look like the opposite is occurring. Like there is strength.

And really what this is, it's just a feint. So this occurred before this high was even hit. Alright. This is someone trying to push price down. And you see this a lot in bitcoin and what it looks like Is it looks like this, okay? It makes a move up or that's a crappy looking move, makes a move up. That's the wrong tool. Let's go again. Makes a move up, okay? Is rejected. And then what you see is, you see this kind of grinding behavior towards this high. Okay? Now this is different than if it was this. If you had a move up that fell through support and then was grinding against support like that, okay? These are two different things. This is one right here. This is again midpoint point of control. Okay? When this falls after being rejected, it comes back to the middle of the range, alright? These two candles right here, these two strong candles off of the low are clear. Sign right away that buyers are bidding this up, okay? And what you'll see down here is you'll see that the bid in this case is a lot of times refreshing in the strength. So when you're in a strong market, all of these moves upward. Any type of selling is going to be immediately absorbed. So you'll see that the bid is refreshing or there'll be strength in the bid, thickness in the bid. All right? And this is not the same, okay? Again, in this case, coming through an area. And this is clearly closed right through the area. It's not even like there's any wick or anything. Okay? So in this example and in this example, this, okay, grinding towards the high, all right? And this not making it even through an important point. So just consider the 50 line, alright? A lot of times what you can do is you could look at, for example, if you took the high and the low of this candle and this is the 50 point. We're coming right up into this structure right here pretty strongly and we start to settle down a little bit. But you're finding support right here. You're finding support at this area, which is basically the midpoint of this entire structure. This is why you have to not only if you're a discretionary trader, part of your edge is going to be your ability to determine strength or weakness through price action. Okay? So strength or weakness through price action. To see this grinding behavior, to watch these patterns occur and so that you're not thrown out of position. So when you see something like this, you don't immediately think that this is a short opportunity. Because what happens, you short right here.

And immediately the first thing the price did was it came right back above this level. It's not like again we saw in the other one where you come back down below, you close below, or at least you're struggling at the low at some low. There's no low that struggled at here. So these lows aren't struggled with. These lows aren't even touched. And these lows are way further out of the mix. So really, this was just to scare anyone out of position. This is the type of stuff that you need to pay attention to. So that's that, guys. Okay? Just wanted to do this brief lesson on some of the things that you should be able to identify. Always have an idea of where you are within structure, okay? Have an idea of where the high is. Have an idea where the low is. Have an idea where the midpoint is. Have an idea again where the value area high, value area low is and where this high volume node is. Because a lot of times one of the things you could see is, for example, right here for this structure. Point of control at the low, A lot of volume at this low at the support. So remember what happens when we have a lot of volume and the support's holding all these guys down here who are shorting below this area trapped. Okay? Same thing over here. Point of control at the low, except here, notice the difference. Point of control is more neutral for this range versus value area high and value area low. It's actually more towards the midpoint than it is towards the low. So something you wouldn't want to see is you wouldn't want to see a structure like this with a range range like this and something like the point of control up here, okay? And in this case, you know, any type of weakening price action below this point of control should be the indicative of further weakness or potential. In this case, potentially a breakdown to set up. So that's that, guys. All right, everyone have a fantastic night. As always, exercise proper risk management and trade effectively.