The market loves to lie right before it tells the truth.
It pushes price just past a level, gets everybody leaning the wrong way, and then snaps back and goes the other direction.
If you have ever jumped in on a breakout and watched it reverse on you a candle later, you have met this move. It has a tell, though, and once you can see it, you stop getting caught by it.
I have a level I track for exactly this, and the other day it set up about as cleanly as it ever does. Let me show you how it works so you can add it to your own toolkit.
So here is the level: It is the 13% Fibonacci, an extra line most traders never even add to their Fibonacci sequence. I use it as a fake out level, and once you have it on your chart it does a lot of work for you.
First you track your flags.
A bull flag is that little pause-and-drift higher after a push up, and a bear flag is the same thing rolling over to the downside.
Those flags give you your high and your low, and that is what you run the Fibonacci off of.
Then you watch one thing. Does price close above the 13% line, or does it just wick up there and fail? When it pokes above and cannot hold, that is what I call a fib out, because it fibs you.
It looks like the breakout. It is not the breakout.
And that fib out is the trade. When price fakes above the line and rejects, you fade it back the other way, getting short under the original flag level where it broke down, with your stop right back at that same level.
You can even stack a little confirmation on top of it.
A thin spot in the volume profile, where not much trading happened, is an area price tends to fly through. Line that up with the failed 13% level and you have got a higher-probability read instead of a guess.
That is the whole point of the 13 percenter.
It does not tell you the future. It tells you when the move in front of you is real and when it is just the market fibbing you before it goes the other way.
Add it to your sequence and watch how often that wick shows up right before the turn.
Rock On,
Voz