Breakout Setup Failure Rate Analysis | What can be learned from setups that failed to breakout? — Transcript

Full transcript

1. 0:00hi guys welcome to the channel in this video  I would like to share findings related to the
2. 0:05breakout setup after a deep dive on stocks  that didn't have a breakout I'll also share
3. 0:10some observations on the data but also some  thoughts on should you do such a deep dive
4. 0:15or not there are more than 125 slides ahead  that's why I'll keep a good Pace during the
5. 0:22presentation but you pause and review the slides  in more details whenever needed here are the open
6. 0:28questions and how this particular presentation  is structured how many setups that failed were
7. 0:33identified what was one of the main observation  of the Deep dive what causes a setup to fail
8. 0:41in which of the 30 minute time frames are  breakdowns more likely to happen how much
9. 0:46volume is present in the breakdown area what is  the level of correlation with spy breakouts map
10. 0:532.0 adding breakdowns a very interesting part  of the presentation I highly advise you not
11. 0:59miss these parts what is the ADR in the breakouts  and breakdowns data set and where can I get Edge
12. 1:06when trading breakouts a lot of topics to cover a  lot of interesting information so let's go here's
13. 1:13the first one how many setups that failed were  identified in the initial Deep dive I was looking
14. 1:20for breakouts and a total of 963 stocks were  identified however while doing the Deep dive
15. 1:26I could see situations when a setup did happen  there was a first leg and then a consolidation
16. 1:33sideways but there was no breakouts and I was  curious to see how many situations like these
17. 1:40are out there and why this is happening that's  why I initiated this second Deep dive where I
18. 1:46was looking for the setups that failed with the  assumption that understanding why they fail could
19. 1:52help better predict and be in the stocks and  read the stocks that are about to break out I
20. 2:00was looking for setups that look like this and  here are the results a total of 615 breakdowns
21. 2:08were identified a pretty high number I would  say later in the presentation I'll compare the
22. 2:13breakouts and breakdowns on different parameters  as a result this is the what you see on the left
23. 2:21is referred to the breakout what you see on the  right is referred to as breakdowns and when we
24. 2:28discuss about the setup the setup refers to the  first leg upwards and then the consolidation
25. 2:34the Deep dive was done on the same stock selection  as the breakouts Deep dive and included the
26. 2:40same time period a total of 2578 stocks were  reviewed as with the breakouts no biotech no
27. 2:48ETFs were included and a timeline of January  2017 to December 2022 for more details on the
28. 2:56breakout setup I highly advise you to watch  these videos available on the channel what
29. 3:01were the criteria for selection and what  all the 615 breakdowns in the data set have
30. 3:08in common a first leg of 12 momentum or higher a  sideways move of at least 6 days and then to have
31. 3:19a breakdown traded volume in the considered  like breakdown day of more than 100K shares
32. 3:29please have in mind that the study is biased there  is a selection bias the study looked at setups
33. 3:34that had a sharp move up or a sharp move downwards  and did not consider setups that had a more
34. 3:43sideways move and in addition to this there is a  researcher bias meaning that some of the setups
35. 3:49I selected you will not consider good setups and  in addition to this there is also the researcher
36. 3:56experience level so I'm a beginner and the chances  of me doing wrong claims or wrong analysis is
37. 4:04much higher so have this in mind as well that's  why have in mind the statistical data could be
38. 4:10more accurate don't take the numbers for granted  rather look at what the big data patterns suggest
39. 4:17okay now that's some elements about data are  covered here's the next topic what was one of
40. 4:22the main observations of the Deep dive and a key  learning point when you study the setups with the
41. 4:28breakouts you study the setups with additional  momentum the market was ready to pay more and
42. 4:34the stock moved up and when you do that deep dive  and you look for those breakouts in the historical
43. 4:39charts you look again and again and you find those  breakouts with additional momentum in a sense you
44. 4:47see strength this can create a perception that all  or most of the tickers that set up are more likely
45. 4:54to break out you may think that the goal itself is  to find the setup as they move upwards is secured
46. 5:00well when I did the Deep dive to look for those  setups that did not break out this is what
47. 5:08happened so when you study the setups that did  not break out you studied the setups that did not
48. 5:14benefit from additional momentum the market was  not ready to pay more the stock continued sideways
49. 5:20or faded and shifted in a downtrend mode looking  at historical charts you see this downtrends
50. 5:27you see the setup and the downtrend move again  and again and what I could see is the weakness
51. 5:35you see weakness sometimes even in consolidation  phase well this understanding that the setup could
52. 5:42show strength and could show weakness even in  consolidation phase came up together after doing
53. 5:50both the breakouts and breakdown Deep dive and to  me is a very important element on how to better
54. 5:57trade the breakout setup then I took all these  breakouts and breakdowns and tried to see what is
55. 6:04their repetition per year and here are the results  a pattern suggested by the data is that the years
56. 6:11that have more breakouts are also the years that  have more breakdowns in a sense the setup is
57. 6:18created when there is more momentum on the market  we know that 2020 and 2021 were years with a very
58. 6:26high liquidity and momentum on the market it's a  very basic and logic conclusion but now there is
59. 6:33also some data to prove this more momentum creates  more setups and some of them break out and some of
60. 6:39them break down let's go into a couple of examples  so we see here a setup that is surfing nicely the
61. 6:4610 days moving average sign of strength and then  breakout so set up with strength here's another
62. 6:53example also nice surfing and then a breakout  another situation with a longer consolidation nice
63. 7:01surfing of the 20 days moving average also some  sign of strength and later breakouts then here is
64. 7:09a situation that to me is a setup with the first  leg then a consolidation area with showing some
65. 7:16weakness here and then some weakness later here is  another situation which to me is a setup weakness
66. 7:24here and weakness later here is another setup with  a lot of weakness in one day and then continuous
67. 7:33weakness moving forward reviewing both breakouts  and breakdowns again and again let me to this
68. 7:40conclusion this setup can continue with strength  and with weakness in the consolidation phase the
69. 7:46setup is showing the elements of strength and  weakness between the support and resistance line
70. 7:51diagnosing strength and weakness in the setup is  an edge this dynamic between strength and weakness
71. 7:59is very similar to football or to any situation  where two teams compete against each other and
72. 8:06in our case it's a competition between Bulls and  the Bears the example is a bit weird but give it a
73. 8:13chance it will help me bring a point and football  things may look random but actually in the upper
74. 8:19part of the field there is the line of offense  and when it comes to the setup on the upper part
75. 8:25is the resistance line or what I call the front  line in the lower part of the field there is the
76. 8:31line of defense and the setup in the lower part  has the support line well a team pressing attack
77. 8:39for a long time is perceived as showing strength  and is considered more likely to win when most of
78. 8:45the team is in the upper part of the field for  setup is similar a setup that has price action
79. 8:51close to resistance is a setup that displays  strength if it presses in that area for a longer
80. 8:58period of time then it's more likely to break out  and the other way around a team defending itself
81. 9:04so a team located in the lower part of the field  for an extended period is perceived as showing
82. 9:11weakness and is considered more likely to lose  a setup that has price action close to support
83. 9:17is a setup that displays weakness or signs that  the Bulls are taking a breath if it will not show
84. 9:24additional momentum the setup is more likely to  break down well when you trade breakouts you take
85. 9:31the position of a forwarder forwarders engage  in the game in particular areas of the field at
86. 9:37the front they do not usually engage in defense  and have a lower prances at the Midfield when it
87. 9:42comes to breakout data suggests the same logic  is applicable do not enter when the stock is in
88. 9:47defense engage in some cases at the milled field  which is an anticipation play experience needed
89. 9:53and have an active action when the stock shows  strength and passes their resistance front line
90. 10:01well there's a big disclaimer though in football  the team that attacks the most doesn't always win
91. 10:06and neither does the team that has the highest  possession of the ball as in football the setup
92. 10:11that shows a high amount of strength doesn't  always break out and neither does the setup
93. 10:16that has the initiative for a longer period of  time okay let's go back to charts and couple of
94. 10:23examples so what you see here now on the screen is  a ticker that had a breakout the data is presented
95. 10:28within the 30 minute time frame intraday data  with the white areas being the active trading
96. 10:34hours gray areas being the after hours and we  see a ticker that had a nice breakout you trying
97. 10:41to diagnose did this sticker showed strength or  weakness during consolidation it's a little bit
98. 10:48difficult to do but as soon as I try to add the  resistance line and the main support line and
99. 10:55then one extra blue line that represents sort of  the middle of the field then it's much easier to
100. 11:03make sense of the price action so we see in this  area the Bulls taking a breath and some signs of
101. 11:08weakness but then strength strength offensive  offensive offensive and a nice breakout later
102. 11:17here's another example with the breakouts and when  looking at intraday data what we could see is some
103. 11:25weakness here but then some strength an attempt  to break out so offensive Play Still strength uh
104. 11:32offensive and then breakouts another example with  a longer consolidation so we see strength of the
105. 11:40setup moderate play weakness of the setup moderate  strength still a lot of strength in the second
106. 11:47half of consolidation and then break out and then  look let's look at couple of examples where we see
107. 11:55a breakdown and how the weakness usually plays  so we see weakness here and an attempt to attack
108. 12:02but didn't work out so weakness weakness weakness  weakness and last push and then further weakness
109. 12:10down another example of a breakdown again you can  read here right away weakness of the setup and
110. 12:18then it goes into strength so you see how these  dynamics of strength and weakness very similar to
111. 12:24a football game passing back and forward uh but  then here we have strength and the setup shows
112. 12:31weakness end of the day then starts the day with  weakness and continues forward with a breakdown
113. 12:39one more setup a nice area of strength for a  while but then attempting and showing weakness in
114. 12:48the second half of the day and attempt moderates  weakness weakness weakness in the second half of
115. 12:54the day weakness in the second half of the day and  breaking down so the defense lost their positions
116. 13:03in the previous video how important was given to  the resistance line as it's very important to the
117. 13:09breakout setup however studying weakness it was  clear and evident that the support line also plays
118. 13:17a very major role in keeping the setup together  so it leads to the conclusion that both structural
119. 13:23lines are equally important to the nature of  the setup this is one of the main conclusion to
120. 13:28summarize this part of the video understanding  and becoming aware that the setup can show
121. 13:33strength and weakness and starting to perceive  these Dynamics proactively through the football
122. 13:38field model is an important element learned while  studying the setups that failed and now after
123. 13:45doing both deep Dives the strength and weakness  elements came together and I could see them in
124. 13:50play when doing your Deep dive do this exercise  highlight the support and resistance of the
125. 13:56setup reviewing its strength and weakness areas  identified the breakout candle this will help you
126. 14:03much better learn and understand and progress in  reading the setup well here's the next question
127. 14:10what causes the setup to fail in 2.9 of the cases  it was considered as an unexpected news catalysts
128. 14:19than in 10.9 of the cases the stock started to  break down a day after or in the day of an earning
129. 14:28call that's why it was considered as that was the  main cause of failure and Association doesn't mean
130. 14:34causation but that's how I assigned it and then  in 33.2 percent of the cases stock moment it was
131. 14:42a stock momentum loss and in 53 percent of the  cases it was considered that the market had the
132. 14:49pressure on the individual ticker and it forced it  to break down the stock momentum loss and markets
133. 14:56pressure parts are very subjective I did them from  my side based on reading the charts however don't
134. 15:04take the numbers for granted look at the bigger  patterns of the data let's look at a couple of
135. 15:10examples so unexpected negative news cattle list  here is an example with a stock care DX that
136. 15:16that plunges after a competitor showed some good  results in a trial here is another example with a
137. 15:24good setup nice consolidation but then there was  some serious concerns on a plan merger it didn't
138. 15:33go through as a result the stock plunged right  after the news and here's another example where
139. 15:41the stocks create a setup shows some strikes even  breaks out but then there is an announcement of 10
140. 15:49million share secondary shares offering and there  is a big gap down here's another example where we
141. 15:56have a nice first leg good consolidation a nice  slide sliding on the 10 days moving average but
142. 16:04then we get the news that's a company that wanted  to acquire Dixie walked away and based on that
143. 16:11the stock breaks down a conclusion here negative  news catalysts don't happen often but can create
144. 16:18a significant shift in momentum and major losses  if not managed correctly here's the next cause
145. 16:24of failure earning calls a total of 10.9 percent  of situations when a setup breakdown a day after
146. 16:31or in the day of earning call announcements a  pretty high number of situations and we'll see
147. 16:38in the examples it's very impactful a study was  done for the breakouts as well and what we see
148. 16:43is a total of 5.7 of breakouts 52 out of 963  moved upwards after an earning call and 10.9
149. 16:53or 67 out of 615 moved downwards after an earning  call still a higher number of breakdowns and the
150. 17:05earning calls may have a way more negative  impact on the setup than a positive impact
151. 17:12let's look at couple of examples so here  we see a first leg then a little bit of a
152. 17:18choppy wavy consolidation but then look at the  earning call at and what a gap next another one
153. 17:25nice momentum shopping but then it breakouts  couple of days later earning calls done nice
154. 17:32first leg type consolidation then earnings and  a breakdown another set of significant gap down
155. 17:42another example low momentum consolidation  earnings giving back all the gains another
156. 17:49one with the higher Gap after earnings another  significant momentum uh sliding and the sideway
157. 17:58move and then earning calls and what's a big loss  of momentum and significant losses to the account
158. 18:06if not managed well another example of damage  to the setup and to the accounts another example
159. 18:15earning calls damage so what we saw earning calls  can be damage damage damage entering the setup a
160. 18:23few days ahead of earnings can be a very bad idea  and I gave an additional number of examples so
161. 18:31that you see how bad the impact of earnings can  be on a setup the next cause of failure stock
162. 18:39momentum laws in 33.2 percent of the cases we will  look at couple of examples stock momentum loss was
163. 18:46assigned to a ticker when we see the markets the  overall Market in an uptrend but the stock still
164. 18:54loses momentum and the price continues to move  downwards let's go look at couple of examples
165. 19:01so what we see here on the right is spy we see  a move upwards stock continues downwards sideway
166. 19:09and still an upward move the stock downwards as a  bit of correction upward move major move downwards
167. 19:20upward move that individual ticker loses momentum  so it's a momentum loss goes downwards upward
168. 19:29momentum on spy momentum loss on the individual  ticker upward momentum nice first like sideway
169. 19:38consolidation but then loss of momentum a bit  of correction here Market pretty choppy but
170. 19:45still upward and let's see that individual  ticker loss of momentum upwards major loss
171. 19:53of momentum upwards it's a loss of momentum a  bit of upward side weight but then the ticker
172. 20:01again upward that leads to the conclusion in  some situations even if the stock shows good
173. 20:08initial momentum in the first leg the market will  not be ready to pay more for whatever reason and
174. 20:14the individual ticker will lose momentum even  if their overall Market continues to move up
175. 20:22and here is the last cause of a setup to fail  Market pressure assigned in 53 percent of the
176. 20:28cases the majority of situation when a setup is  breaking down is because there is a correction
177. 20:35on spy let's look at couple of examples here is  the spy on the right and we see it goes through
178. 20:41a correction and the setup is breaking as well  a correction the setup doesn't keep under the
179. 20:48pressure of the market here is a correction  ahead and the setup is anticipating sort of
180. 20:55the correction and also breaks down another setup  in the same couple of days ahead of the correction
181. 21:03it's also breaking down correction breaking down  correction breaking down a smaller correction but
182. 21:15also we see on the setup breaking down here  an example where the correction happened the
183. 21:21setup hold for a long longer period of  time but then under the pressure of the
184. 21:27markets it also goes in a breakdown a small  correction the setup in a small correction
185. 21:35a small correction here A Tiny correction here  we see how the individual ticker is following
186. 21:43the market Trend the April of 22 we have a  market correction also happening on the ticker
187. 21:53the same losing momentum a market correction a  ticker that lost a lot of its value overall the
188. 22:01market has a major impact on the performance  of the setup and a good coordination between
189. 22:08what the individual ticker strength and weakness  looks like and the overall market performance is
190. 22:15always needed when trading the breakout setup  here it is again the slide with the full list
191. 22:22of causes of failure I hope all those examples  that were shared convince you that a good process
192. 22:30and a good risk management should be in place to  trade the setup well and to protect your capital
193. 22:37I will end this part of the presentation with the  code from Christian stop loss is your best friend
194. 22:46the next topic we'll look into is in which of  the 30 minute time frames are breakdowns more
195. 22:51likely to happen a similar study was done for the  breakout setup as well a day has a total of 13 30
196. 22:59minute time frames and what I was looking for is  to see in which particular 30 minutes candle the
197. 23:07breakdown is happening and in this case I also  considered its structural candle of course I
198. 23:14wanted to give it a name and because it's the  moment when all this flow is going downwards I
199. 23:23gave the name the waterfall candle the 30 minute  candle on which an entry with the stop at the
200. 23:28candle's law will maintain you in the position and  represents the entry with the lowest risk here are
201. 23:34the results very similar surprisingly similar  to what the breakouts data was 58 of breakdowns
202. 23:43happen within the first hour of the trading day  79 before 12 pm and if adding them Side by size
203. 23:52the breakouts in green and the breakdowns in red  per time frame we see that the price action is
204. 23:59quite similar even if in opposite direction and  at different locations I will let you pause and
205. 24:06review the data in more details but yeah this  led me to another conclusion a similar Behavior
206. 24:13at support and resistance can suggest that both  structural lines are equally important to the
207. 24:19nature of this particular setup the conclusion  very similar price action in opposite direction in
208. 24:26the 30 minute time frames for both the breakouts  and breakdown setup a short wrap up and some key
209. 24:32ideas that were covered so far first we looked  into a way to diagonal strength and weakness
210. 24:39through that football field model then we also  covered the support and resistance lines and
211. 24:45how important they are to the structure of the  setup and we looked into the causes of failure
212. 24:52and examples that prove that it's very important  to have a very good quality risk management
213. 24:59the presentation you are watching now plus  three more in addition to the data set with
214. 25:05breakouts and breakdowns daily and intraday  data with side-by-side comparison with pi
215. 25:11and then Excel file with measurements plus the  breakout map and an exercise with 100 breakouts
216. 25:18and a hundred breakdowns with intraday data so  that you are able to identify the structural
217. 25:23elements and practice strength and weakness all  this content is available for download on the
218. 25:30link in the description thank you to everyone that  downloaded you made this video possible and thank
219. 25:37you for support let's move on to the next question  what is the level of correlation with pi to study
220. 25:43the correlation a side-by-side comparison between  the price action of the individual ticker which is
221. 25:49displayed on the left was performed on The Daily  chart with what the overall markets or spy did
222. 25:55within the next 7 to 10 days after the breakdown  happens in this case the market moved in an upside
223. 26:02Trend in this case we see the breakdown happened  and in this period the market was in a sideways
224. 26:09Trend and here it has an is an example when  a breakdown is happening and after the market
225. 26:16is already in a correction but then after the  breakdown they it also continued moving downwards
226. 26:24and here are the results a similar study was done  for the breakouts and we see a very big majority
227. 26:30of cases spy is moving upwards in the next seven  to ten days after the breakout happened when doing
228. 26:39a similar analysis for the breakdowns here it is  the situation is changing the breakdowns happen in
229. 26:47a majority of cases in one spy is in a downtrend  move a bullish environment is more favorable for
230. 26:55the breakouts to succeed and a bearish environment  is more favorable for breakdown rounds it's common
231. 27:01science but now I also have this context awareness  and how important is the price action within the 7
232. 27:10to 10 days periods after a breakout or a breakdown  is happening and the more General conclusion the
233. 27:19market has a major impact on the performance of  the setup in addition to this I looked if the
234. 27:2510 days moving average is above 20 days moving  average on spy when the breakouts or breakdowns
235. 27:32are happening here are the results in 80 percent  of cases when the breakouts happen at 10 days ma
236. 27:40is above 20ma but when breakdowns are happening  the 10 days is above 20 days moving average in
237. 27:4976 percent of the cases this was surprising  and a bit unexpected both the breakouts and
238. 27:56the breakdowns are more likely to happen in the  bullish Market environment when 10 days is about
239. 28:0220 days moving average I wanted to step back and  see how many breakouts and breakdowns happened per
240. 28:11month within this six years time period period  that was studied and what you see on the upper
241. 28:18part the breakouts and the lower part breakdowns  so many and happening often overall this is a good
242. 28:27learning point for trading breakouts the study was  still intended to understand how to better trade
243. 28:34the breakouts there is a breakout setup noise that  must be a risk managed correctly in order to be
244. 28:41profitable on the long run there are always set  up as we see across the years when and situation
245. 28:49when setups are forming but for whatever the cause  they lose momentum they don't break out but these
246. 28:57particular situations are the risky situations  when you can encounter losses in addition I try
247. 29:04to plug on top of the the charts areas and months  when the market was in a correction we see here a
248. 29:11correction almost no breakouts but still some  breakdowns no breakout at all some breakdowns
249. 29:19no breakouts some breakdowns and then the bear  Market of 2022 bikes in breakouts in breakdowns it
250. 29:30is important to have a balanced approach and good  understanding of the market context to correctly
251. 29:34evaluate what Market you're going through  and what outcomes are more likely to happen
252. 29:40something to highlight about 2022 bear market  and an observation on breakouts and breakdowns
253. 29:46considering this was a year highly impacted by  energy sector geopolitical situation and there
254. 29:55was a major context to it if we remove the  energy sector breakouts and breakdowns then
255. 30:01what we see is that in 2022 we decreased down to  1996 breakouts and 95 breakdowns it's a similar
256. 30:11number more or less to what happened in 2018 so  definitely not the best favorable year to trade
257. 30:21the breakout setup and here's the next topic the  breakouts map 2.0 adding breakdowns first here are
258. 30:30some details on how to read the chart so what  you see is the Spy charts one chart means one
259. 30:36year of data in this case it's breakouts map and  breakdowns map for 2017 the moving average is are
260. 30:45the 10 20 50 and 100 days moving averages every  time you see an arrow up that's a breakout every
261. 30:53time you see a arrow down that's a breakdown a  day it's the day when the breakdown started every
262. 31:00time you see a arrow up with a DOT on top that's  breakouts that happened the day after or in the
263. 31:09day when an earning call was so an association  with an earning call Trigger or Catalyst could
264. 31:16be in place and the same is applicable for the  breakdown setup color coding is displayed on the
265. 31:24bottom of the chart I advise you to pause  and review the chart in details for 2017 a
266. 31:31comment to highlight breakouts and breakdowns  happen in clusters within sectors as we see in
267. 31:38this case technology technology energy here  breakouts come in cluster of breakouts as we
268. 31:45see here here here here here and breakdowns come  in clusters of breakdowns as we see here and here
269. 31:57's the breakouts and breakdowns map for the  2018 what I highlighted here was first in
270. 32:05periods of Major Market Corrections there are  no breakouts and neither many breakdowns most
271. 32:12likely because the individual tickers cannot  create the first leg of the setup the next
272. 32:17elements I highlighted the market Corrections  cause failure of the setup and represent a good
273. 32:24opportunity to enter the setup on the short  sides we see a market correction here and a
274. 32:31lot of breakdowns we see a market correction  here breakdown many breakdowns many breakdowns
275. 32:38as well here's the map of 2019 I let you pause  and review the charts here are the comments I
276. 32:48highlighted on this one first a high number of  breakdowns happened even when 10ma is above 20ma
277. 32:56some tickers or sectors are losing momentum  even in an overall strong Market environment
278. 33:02this chart shows very well that from the beginning  of the year till the end of the year we see the
279. 33:1010 days moving average above 20 almost most  of the time here and and here and even so in
280. 33:18this period highlighted very well here 10 days is  above 20 days moving average and we see how many
281. 33:25breakdowns happened a lot of them also happening  because of some news after earning calls but they
282. 33:33do happen in addition to this this chart is  highlighting very well that a sharp bullish
283. 33:40handle on Spire with further further upwards  momentum generates many breakouts we can see
284. 33:47a sharp bullish candle here we can see a sharp  bullish candle here and one highlighted here
285. 33:54following this we see a lot of breakouts here a  lot of breakouts here and a lot of breakout here
286. 34:01and the same is applicable on the bearish side a  sharp bearish candle on spy with further downward
287. 34:08momentum generates many breakdowns we can see  that here with breakdowns following we can see
288. 34:16that here with many breakdowns Following  also some of them having the earnings day
289. 34:24in the same day another sharp candle bearish  candle on spy and a lot of breakdowns created
290. 34:34the breakouts and breakdowns map of 2020 what a  crazy year especially here in the second half of
291. 34:43the Year here is what I highlighted there are  periods when there are way more breakouts and
292. 34:49periods when there are way more breakdowns  understanding how to position yourself can
293. 34:53be an edge spy can give good suggestion on what  setup is more likely at the end of 2020 and the
294. 35:02beginning of 2021 was just crazy also a big amount  of breakdowns happening here is what I highlighted
295. 35:11for this chart there are areas with breakout traps  situation when after a good series of breakouts
296. 35:18many setups are forming but they break down these  areas can generate big losses where we can see
297. 35:25that we see here a lot of breakouts But Then  followed by breakdowns a lot of breakdown codes
298. 35:32followed by breakdowns a lot of breakouts and then  changing sentiments the market still goes upwards
299. 35:41but there is a lot of setups that do break down a  lot of breakouts and followed by some breakdowns
300. 35:51in addition many setups form due to a good Market  momentum in this area we see spy moving up a lot
301. 35:59of setups created the first leg went into a  consolidation but then they failed as soon as
302. 36:05earnings calls happens and and then usually  High number of breakdowns happening in this
303. 36:13example in 2021 here is the last chart in  the group of breakouts and breakdowns map
304. 36:20it's the year of 2022 here are the comments  that I highlighted on my side breakouts and
305. 36:26breakdown setup gave many opportunities during  the 2022 bear Market breakdowns happen a few days
306. 36:32before the 10ma crosses the 20ma on the downside  and when we see an well-defined downside Trend
307. 36:41and correction from Spy and from the overall  Market we can see that as a good example here
308. 36:49across on the downside and then markets moving  downwards and a lot of breakdowns here another
309. 36:58example when we see a reverse a lot of breakdowns  happening here another change of Trends a lot of
310. 37:06breakdowns happening and here as well a lot of  breakdowns happen so that was it in terms of
311. 37:12charts and looking at all these six years of  charts with breakout outs and breakdowns and
312. 37:19stepping back as a general conclusion there are  many setups that fail without good knowledge and
313. 37:25process in place you can lose all the money  you have and all the money you can borrow
314. 37:32an analysis to the ADR was done on the  historical charts in the data set for
315. 37:37both breakouts and breakdowns the formula for  EDR can be also found on Christian's blog for
316. 37:44both dc2000 and trading view because I was  working with trading view this time it was
317. 37:50very convenient to add it as an indicator  on the chart it is this Elon line on top
318. 37:57and in the moment when it crosses the daily dotted  line crosses the ADR it's this number on the chart
319. 38:07here are the results in the data sets 359 stocks  or 37.3 percent of the total have an ADR below
320. 38:16four percent this is a good and bad news in the  same time additional study is needed what is for
321. 38:24sure is that Christian advises to trade setups  with an ADR of 4.5 to 5 or higher on my side the
322. 38:34data set had a lot of tickers with an ADR below  four percent share a couple of examples here is
323. 38:42a setup with 2.16 ADR here is another breakout  with 164 ADR here is another example of with
324. 38:51that setup that looks okay but it has a 2.36  ADR additional study is needed and when I put
325. 39:00the breakouts and breakdowns ADR on the same chart  here are the results looks like the four percent
326. 39:07Mark is like a silver line all that happens below  four percent in that area the setups with the low
327. 39:16ADR are more likely to break down and when we  cross four percent at the beginning it's kind
328. 39:23of equal but later setups with the higher ADR are  more likely to break out what data suggests about
329. 39:33the character and skills needed for the breakout  setup after looking at so many breakdowns well
330. 39:40looking at failing setup is like looking at many  car crashes there are many situations when things
331. 39:47go totally wrong you'd understand that you must  drive with responsibility balance maturity and
332. 39:53awareness good knowledge and process should be  in place if you want to make it on the long run
333. 39:57taking these qualities and plugging them on that  football field thing and depending on the area
334. 40:05where the setup is at the moment then you need to  display different qualities and character at that
335. 40:12particular time for example you have to be more  grounded balanced patient constantly diagnosing
336. 40:18and aware of individual stocks and market  dynamics when the consolidation is happening
337. 40:24and the stock shows moderate actions but then  as soon as the stock is starting to show more
338. 40:31strength approaching the line of resistance then  it's expected to be more decisive there should be
339. 40:39that sense of don't give up and Trader has to  display sharpness and quickness in action the
340. 40:47same is the case when there is an attempt to trade  the breakdown where can I get Edge when trading
341. 40:55breakouts in the previous video these were the key  qualities and elements highlighted in order to get
342. 41:02Edge so recognize the setup entry I'd liftoff a  good understanding on the market context trading
343. 41:07character and skills well after seeing so many  failures and setups that did not break out here
344. 41:16is how the new breakout kalamagi style Edge graph  looks like recognize and diagnose the setup is by
345. 41:25far the biggest change recognizing the setup is in  a sense easy after a while it's way more difficult
346. 41:33to constantly be able to diagnose correctly the  strength and weakness of the setup to watch for
347. 41:40these Dynamics and plan your actions in the future  more importance has to be added to this element of
348. 41:48correctly diagnosing the setup entry at liftoff  candle remains Market content proved again as
349. 41:55being very important trading character and skills  added more balance maturity awareness and seeing
350. 42:04that things can go very well in a lot of cases  and things can go totally wrong in many cases
351. 42:15here's a new attempt to create the breakouts  Calamity style setup overview it's still work
352. 42:20in progress well what we have is a setup the first  leg is created on average between three to seven
353. 42:28days and has a first leg of 12 momentum or higher  then the stock started to go in the sideways move
354. 42:38of consolidation between 7 to 12 days and this  time there is a major resistance line at the top
355. 42:48which is I called front line and a similar in  importance support line then the setup goes in
356. 42:56a consolidation and dynamic between strength and  weakness that can be read similar to a football
357. 43:04game and if the strength is high the market  is favorable then most likely the setup will
358. 43:14break out in the first one hour of the day or  before 12 pm if not the setup up shows weakness
359. 43:23and if the market is unfavorable the setup will  most likely break down with the start through a
360. 43:32waterfall candle that happens within 58 of the  cases within the first one hour of the day 79
361. 43:40of the cases before 12 p.m a very high importance  is to not enter the setup before earnings because
362. 43:51they represent the biggest cause of major failure  of the setup and in terms of volume the breakout
363. 43:59happens with higher volume on The Daily and  intraday 30-minute chart with them breakdowns
364. 44:07having a more step-by-step fading activity  well that was it I hope you liked the Deep
365. 44:15dive coming soon breakouts color Market style  in biotech this sector was kept on the sides
366. 44:21due to its reputation but now wood will be in  Focus the main question to be answered is this
367. 44:28industry any different should I trade breakouts  in the industry we'll look at both breakouts and
368. 44:34breakdowns to see if there is something be worried  about give it a like on YouTube subscribe and make
369. 44:43sure to retweet it on Twitter this helped  me super much thank you best of luck peace