breakout

Hi Karthikmarar,
first of all let me congratulate you on your sense of analysis and for the passion what you have on TA.you are very good at TA. And also as you said the example what you have taken is not that right on a broader sense.
Basically the breakout is said to be failed if the asset price enters back into the congestion zone by 50% of the congestion range.
But the so called sharks who know this, they hammer the stock and take it back. There yoiu will find bulltrap and beartrap as well. Right now I can't write more than this. But one example for this happened in ALPS INDS. You pl.check the charts from last november till date. I am attaching it here. Firstly there was an upward breakout. Then it went back into congestion. Then the fall with gap for exits. Then one more rally followed by a correction. But the operator took care in such a way that the stock didn't cut the pr. bottom.pl. observe volume behavior. It itself will be the clue.
In this stock, trade continuation can be discussed. The operator can fool the traders only once or twice. Then the move will be in its direction. But getting stopped in the stock should not put us to distress. We should continue the trades. REMEMBER the number of times the operator tries to get the traders out, the bigger will be the move. On every trap he will lose money. And on the real move he will collect back all his losses and make all big money.

The very idea of the operator to run stops is to get the people out of the game in his security to avoid the noise.If noise is not there, he can happyly run the circular trades in that and make the price moves in his direction.

I am unable to attach the file for its size, Karthikmarar you pl.take care of it.
AJAY

Dear Ajay

Thanks. Very nice writeup on the Operator manipulations. I am enclosing ALPS Industries Chart mentioned in your writeup. I have also marked up the events discusssed in your writeup. Just check.

Best regards

Karthik

Dear Karthik,
EXCELLENT PRESENTATION. You are really blessed. Pl.keep going.
ALL THE VERY BEST.
AJAY

Ajay,
if you have obsevered the chart after the break up it has actually moved up & faced resistance at the upper trendline (you'll notice it if you draw a trend line joining the previous peaks ie begning Nov04 to ending dec04 & projecting it). Then it came down only to take support at the level where it consolidated prior to that. (you can notice it if you extend the shorter horizontal line, in the example attached, to the left).
the fact is that the actuall break up has happened after this period (ie after 16 may 05), the stoch has gone up sharply with good volumes took support at where it broke up & its previous peak & later has moved up further.

But when it comes to operators i have no choice i have to agree with you that manupilation takes place but it is all in the game.

regards
4candles

Hi cmlee, Karthik, Ajay and Murali...
Below I am adding a supplement to the issue of breakouts and false breakouts. This is from my research and notes of the past. It's always difficult to remember everything one has read, so this was a good opportunity for me to open some books again! Thanks!

Breakouts almost always occur at points of discord and divergence: levels of support and resistance. On either side of these levels, a lot of price action is generated, but no one is quite sure just how much force is required to carry price into a sustainable trend. Any position one takes near a breakout level comes with a fair deal of risk, regardless of how perfect a pattern may appear.
Price action responds in different ways to a breakout. First, it may carry through successfully to higher levels. Second, it may generate whipsaws (volatile and choppy price swings through support or resistance levels), resulting in losses on both sides of the market. Third, it may trap buyers in a false move and start a trend in the opposite direction.
It is believed by some technical analysts that a successful breakout occurs in three phases.
It begins when price breaks through resistance on increased volume. This is called the Action Phase. Price increases by a few points, and then reverses as soon as buying interest fades.
From here begins the Reaction Phase. The market will sell off, and propagate the first pullback, where fresh buyers see a chance to get in close to the breakout price. If everything goes well, a second rally kicks in and raises the price above the initial breakout high.
This marks the Resolution Phase where the price creates new highs.
For the three phases of a breakout to succeed, much depends on certain volume action:
Demand must exceed supply during the initial breakout. Volume should drop sharply during the pullback of the Reaction Phase. And finally, fresh buyers should come in to successfully trigger the Resolution Phase.

A false breakouts occurs when these forces fall out of balance.
Whipsaws will prevail when a breakout can't generate an efficient reaction phase. This failure need not necessarily trigger any major reversal, though the pullback will purge out weak hands and push the price back into resistance.

If there is a good number of buyers in the scrip throughout the choppy price action, they will repeatedly support the price, and as soon as the whipsaw fades out, the price stablises resulting in a loss of volatility.
A voluminous sideways movement in a tight price-band will then come into play, which itself acts as a trigger for a buy signal for the experienced traders. This would then start a bounce up in price to carry it beyond the last high.

Mainly then, once the first lot of buyers enter at the initial breakout point, much depends on the behaviour of the successive hoards of buyers.
A false breakout occurs when this second crowd fails to appear for any reason, whether it’s a failure to spot the breakout, or a disagreement with the price pattern. Without the support of fresh buyers, the scrip gets stranded in an overbought zone and falls from its own weight.
To extend this further, every new low will trigger s/l points, building momentum to the down, drawing with it new short-sell traders as more key supports are broken. Here a sharp reversal is now under way.

Hope this will add to the wider understanding of the subject...
Regards.

AMIT,

Can you explain the same taking GARDENSILK as example. I was watching this stock for the last 2-3 months.
Since, i am a newbie and learning, i got into trade in this around 55 level and exit at 75 during the break out.

Now it has touched an high of 80 and retracted to 75 and going at those levels for the last few sessions.

Now, if you post your comments on this particular example, then it will help me to understand better and improve my knowledge.

If possible please provide a snapshot of the Chart with comments on it.

Satya

Hi Amit

Very Nice...so elaborate,simple and informative...what else can we expect from AMIT. Thanks a lot

regards

karthik

Hey Karthik...Thanks for your kind words. I am as much a student of the subject as anyone else!
Regards.

Hi Satya...really glad for your profit on Garden Silk!
I'm afraid since I don't have any software, I'll attempt an explanation seeing my data along with the charting at BSE...you could follow the same on your charts.
Mid '03 at 35 levels the scrip had made a high and fallen off to 30 in about two weeks, which was a previous high/resistance and now giving support. A couple of weeks later 35 was again tested, and this time a breakout there was confirmed which put the scrip into an intermediate uptrend. Thereafter, following a series of moves to the up, by Dec end 68-72 was the peak. It hung there a few days, and made a double top of sorts and started an intermediate downtrend where the price action downward quite resembles the previous uptrend...meaning, there were similar key support/resistance levels on either side. If you see your chart, it will clearly show you how the trend reversal to the down violated all the support levels, pushing the price down to the 35 levels again by March '04. From here on, there was a move to the up again which took the price up to 53 by mid April. 53 was also the head of an elongated head&shoulder pattern and again the price slipped to 35 by mid June. So now 35 is a vital key support.
End of June, there is an interesting intermediary 5 ascending wave pattern where in the first wave, the price moves from 35 to 52-55 again. In the second wave, it slips to 45-47. The third wave pushes it back up to 70 again.(70-72 by now is key resistance point) The fourth corrective wave to the down stops at 52-55 by early Jan '05.(52-55 is by now is a key support/resistance). The fifth ascending wave doesn't quite materialise just yet. Now at 60 levels, there is a sidewards movement for three months, followed by a downward slide to 50 which lends support again. Then back to 60-65 in May, and down at 52 again in June. At this point 52 acts as a trigger and there is a steep climb to 72-75-79, which can be seen as a delayed fifth wave. This is where it's at currently and this where it had peaked in Jan '04.
(Usually after the fifth wave, there are three waves to the down which may or may not materialise, and in any case, as there are waves within waves, putting a time frame on this is not possible. This can expand over a long period of time.)
From all this, key levels are very visible and their recurrence is fascinating to say the least. It's always at these points that all the drama takes place, whether uptrend or down. Throughout the above, there would be several false breakouts too, at all the key levels. To analyse each would be quite tedious, so I decided to walk through this two plus years of price action to understand patterns that are vital in analysis.

I know your point was about breakouts, and I rambled on to wider things…but that’s me!
Garden Silk is at an important juncture now. Currently the volume is gone and if it goes down, we know what to look for. In the mid term, it may well begin to trace out a new course to the up...
Hope it helped!
Regards.

AMIT,
for the three phases of breakout, does it all happen in 1 day or in 2 separate days?