When the price tests a support / resistance three possibilities can happen. 1. Continuation 2. Reversal & 3. Fake Breakout. We learnt about reversal in the previous post. Now let us learn about Fake breakouts. If a price moves towards the support / resistance and tries to break above if it is resistance and below if it is support but cannot hold longer and forms reversal then it is fake breakout.
If you see in the previous post (examples for reversal patterns) the first example itself is a good fake breakout. Where you can see the price tries to move up wards but cannot hold longer and forms a hammer which indicates for a good short (sell) entry.
Good Luck.
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