Multiple Attempts to Break-out thwarted by Resistance on XLE
For the past year or so,
XLE
keeps getting rejected at the top of this triangle. In my experience, if Price Action knocks enough on the door (be it support or resistance), eventually the door will be open and price action will break-through.
Steps I noticed on an Impulse Breakout:
- Price Action smashes through resistance
- Price Action looks very bullish
- At some point the price retraces and re-tests the lower level
- The trend will either be confirmed or invalidated based upon
A) if previous resistance is now support, the bullish momentum will likely continue
B) if price falls back through the breakout point, and closes for a candle or two, the breakout is invalidated
Markets are designed to confuse. I've seen several breakouts retest then fail falsely, only to continue on a bullish trajectory.
Let's apply the above logic to the 2021 time frame
1. Resistance at the top of that wedge is hit in Q1
2. During Q2 the price attempts to break out, but eventually fails
3. The lower end of the shape acts as support, sending price action up with more momentum,
4. Q4 the breakout happens and gradually PA falls back down, Retests the top of the range for a single candle, then rips up strongly to the upside.
XLE
keeps getting rejected at the top of this triangle. In my experience, if Price Action knocks enough on the door (be it support or resistance), eventually the door will be open and price action will break-through. Steps I noticed on an Impulse Breakout:
- Price Action smashes through resistance
- Price Action looks very bullish
- At some point the price retraces and re-tests the lower level
- The trend will either be confirmed or invalidated based upon
A) if previous resistance is now support, the bullish momentum will likely continue
B) if price falls back through the breakout point, and closes for a candle or two, the breakout is invalidated
Markets are designed to confuse. I've seen several breakouts retest then fail falsely, only to continue on a bullish trajectory.
Let's apply the above logic to the 2021 time frame
1. Resistance at the top of that wedge is hit in Q1
2. During Q2 the price attempts to break out, but eventually fails
3. The lower end of the shape acts as support, sending price action up with more momentum,
4. Q4 the breakout happens and gradually PA falls back down, Retests the top of the range for a single candle, then rips up strongly to the upside.
Comment:
The triangle was broken, but price action could still make another attempt at breaking through the upside.