What is an Advanced Breakout and how to trade it?Hello Tradingview community! Today I want to share something which is pretty rare to see around, the Advanced Breakouts (AB)!
What is an AB? Is an event when the indicator may anticipate the price's movement. Some indicators like the RSI or the OBV are great for this, and in this analysis, I'll use the RSI as an example.
See the movement on the Nasdaq 100 today? While the price did a double bottom, the indicator didn't, and that's a divergence. But when we see the indicator doing higher highs / higher lows while the price isn't, this is an AB! Usually, this anticipates the next movement on the price, in the direction of the AB.
And we have different types of ABs. Some of them are weaker, some are stronger. Let's see more examples. Since the Nasdaq 100 is doing an AB, some of the faangs are doing this too, like FB:
Here is an example of a weak AB. We have almost no divergence, but the indicator is already doing a new high, while the price isn't. The divergence on AAPL is a little stronger:
The RSI did a twin mountains pattern, but it didn't work and now it is doing a new high. The price did no such thing, and has yet to break the previous high. But this AB is not as strong as the one seen on AMZN:
On AMZN's chart it has an inverted head and shoulders, while the RSI has a strong divergence, as it is doing higher highs and higher lows. Also, AMZN's RSI already broke its resistances, while the price is still falling. This is a strong divergence and an incredibly strong AB.
But since the indicator is anticipating the price's movement, some people will trade the indicator, without waiting for the confirmation on the price. This is a mistake, and it could affect the chances of success of your trade. Always wait for the confirmation on the price. For instance, wait for AMZN's inverted head and shoulders to be triggered before trading it, and use the AB as a confirmation of your initial thoughts.
This is it, community! This is the Advanced Breakout and how to trade it! If you liked this trading idea, remember to click on the “Follow” button to get more trading ideas like this, and if you agree with me, click on the “Agree” button 😉.
See you soon,
Melissa.
