OXY, A TRUE example of FALSE break out !Regardless of what legendary investors (Like Warren Buffett ) or famous traders do, we always should trade our own strategy.
OXY was fighting with a strong static resistance and finally lost the battle. We have 9 hits to this static line which shows how powerful it is.
False break outs are among the most common traps in trading . Although the concept is very simple , many traders fall simply into the trap just because of lack of patience or weak risk management strategy.
Please keep this words in mind and I promise you will be the winner in long term : " Be sure about a break out before jumping into a trade " .
True break outs have three conditions:
1. Break out should be done by a strong high volume bullish candle and at least 50 % of body of such candle should be placed above the valid resistance.
2. A pull back to broken resistance and rotation is necessary to be sure about true break out. Please note sometime we may not see a complete pull back ( if there is a support before broken resistance) but who can accept the risk of false break out?
3. Continuation of movement in direction of break out.
Occidental Petroleum fulfilled first condition in it's last attempt ( if we close our eyes to volume) with a gap up bullish candle above the resistance. It made also a pull back but no rotation and continuation of the upside movement came after that. It means we had a false break out.
I investigated false break outs of a dynamic resistance in my previous publication on BTC and here I showed an example of false break out of static resistance. Regardless of type of resistance (dynamic or static) , concept is the same.
True break out setup has been shown on the chart. As you see the concept is very simple. Please keep this concept in mind and believe me you won't regret.
Wish you huge profits and good luck.
