False Dow breakout protection

ChartMan

Legendary member
5,580 46
I was warning of this possibility in the chat room this afternoon. The dow had formed a triangle formation, and these can lead to a genuine breakout( in either direction), or a false breakout as happened today.This is not restricted to the dow...As you can see from the chart, MACD suggested a breakout to the upside, but it was an unsustainable break. The Velocity indicator did NOT confirm the break.You should wait until the two triangle points converge before making a final descision, unless you are a gambler.....These formations clearly define a state of indescision by buyers and sellers. Neither know which way to go, Long or Short. Eventually, one side wins, but not before a final gasp of hope by the other side.
 

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