nagihatoum

$LTC an case example of a fakeout

BITFINEX:LTCUSD   Litecoin / U.S. Dollar
Fakeouts are a common occurrence in technical analyses. Fakeouts are a failure of a pattern breakout to reach the measured move of that pattern and to completely reverse direction.

In this case we take as an example recent LTC price action where there is one clear case of a fakeout. Yesterday's breakout of the ascending triangle with a measured move of $180, completely reversed and dropped below the breakout level of $173.

Price action reached the measured move of the ascending channel's breakout.

Breakout of the descending channel is not technically a fakeout. It can be viewed as a retest of the descending channel . If price goes back into the channel then it is a fakeout.

Fakeouts are created by market movers to trap breakout traders and overenthusiastic traders. There is two ways a market maker makes money, counter trading the majority of retail traders taken out their stops or trapping and fooling retail traders into taking a certain position usually by faking a pattern or level breakout.

Currently price action is mid range having reached the ascending channel's measured move. Market makers liquidated the 50x margin traders of the ascending triangle's breakout. It is common for price to reverse direction after reaching a measured move. If however price keeps dropping then it will go for a retest of the descending channel , also bottom of the range and take out the 25x longs of the failed ascending triangle's breakout.