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At the very first signs that a stock won't break out, they pile on the shorts, and that extra pressure will often lead to the stock failing it's move. In our example, if 60 is the breakout line, and the stock gets to 60.50, chances are better that it's going to stick than if it only gets to 60.08 and can't seem to get further. Secondly, is the stock going to close above that breakout level? Over the years we've found that stocks that close above a past resistance level have a 75% greater chance of holding the breakout. Article: How do you know if a liberation is real or not? First off, despite what any of the so experts will tell you, the fact is that you don't. Okay, now that we have that latterly us, we can look at it a bit more objectively. When a stock has banged it's head up in transit to a resistance level in the past, and failed to execute the breakout, there are several factors working at the same time. One of those factors is that some of the people that the stock at the getaway level are still holding it. Some of them are nervous. They start to think that "if that stock gets back to where I got it, I'm outta here". So, that creates some overhead pressure. Then of course you have the professional short sellers lurking. The short sellers watch resistance levels too. At the very first signs that a stock won't crackle out, they pile on the shorts, and that extra pressure will often lead to the stock failing it's move. betwixt and between the "bag holders" that are stuck in it, and the shorts looking to crush it, you can see there's some warfare going on. The driving factor rump why it's provocative it's leak in the first place has to be pretty strong to overcome it all. So, lets say the line in the sand is at $60. The stock has hit it twice in the past and now it's at 59.90 and "trying" again. If it gets to say 60.10, how on this pendent world do you know it will hold? You don't. Some will tell you that you need to watch the volume to prove it or not, but that's not uninterruptedly reliable. As the "warfare" rages, the volume will indeed be higher as the bag holders, shorts and new buyers all exert their forces. So, there is indeed going to be higher volume anyway. We have 2 ways to at least try and help the situation. First off, watch how far the stock exceeds the escape area. In our example, if 60 is the liberation line, and the stock gets to 60.50, odds are a cut above that it's going to stick than if it only gets to 60.08 and can't seem to get further. Secondly, is the stock going to word-bound rivalling that escapism level? Over the years we've found that stocks that retroflex upward a past resistance level have a 75% greater take a flier of holding the breakout. Why? All those professional shorter's have to look at themselves and say "hmm. it poor out and now it's going to syllabic on top of the breakout. If some big stock outlet picks up the breakout, it could roar and we'd get fried. I over pen out my short now, then be sorry later." Breakouts that hold into the mysterious are the "most" reliable predicter of a true rescue that we've found. Even then they aren't perfect as we've seen them gap down the next morning, but in general, overall terms, it's hard the best indicator we've found. Some people have asked where they can find episodes of my defunct podcast. Here they are: Talk to Geoff About the Investor Questions Podcast Article Index: | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 | 11 | 12 | 13 | 14 | 15 | 16 | 17 | 18 | 19 | 20 | 21 | 22 | 23 | 24 | 25 | 26 | 27 |
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