TA Education 6｜Breakout or Failed Rally: What Is MA Really Telling You?
Hi, here is Part 2 of MA, focusing on the specific actionable principles (Granville) and the high-probability setups that occur when you combine Moving Averages with Candlestick analysis.
The upcoming TA content will be published on this account.
Part 2: The 8 Golden Rules & Candlestick Fusion
While Part 1 establishes the logic of the Moving Average (MA), Part 2 focuses on execution. This section details the classic Granville’s 8 Rules for identifying buy/sell signals and explains how to sharpen those signals using specific Candlestick Patterns.
Eight MA Trading Principles
1. Breakout Buy: Confirmed Uptrend Signal
The Pattern: This signals a trend reversal. It occurs when the price decisively breaks upward through a Moving Average that has stopped declining, flattened, and begun a slight upward turn.
Market Implication: It confirms that the "average holding cost" is rising and fresh capital is supporting the market, marking the start of a potential uptrend.
Mechanism: The MA typically acts as resistance due to profit-taking from bottom-fishers. A successful breakout proves that strong capital inflows have absorbed this selling pressure, clearing the path for higher prices.
2. Breakdown Sell: A Potential Warning of Market Weakness
The Pattern: This signals a major trend reversal to the downside. It occurs when the price decisively breaks downward through a Moving Average that has stopped rising, flattened, and begun a slight downward turn.
Market Implication: It confirms that the "average holding cost" is falling and capital is exiting the market. This structural damage suggests the end of the previous uptrend and the start of a potential bear market.
Mechanism: The MA previously acted as a support level where buyers were profitable. A breakdown signifies that selling pressure has overwhelmed demand. Recent buyers are now trapped in losses, triggering stop-loss orders and panic selling that accelerates the price decline.
3. Pullback Holding Support: Capturing Continuation Opportunities in Uptrends
The Pattern: This occurs within an established uptrend where the Moving Average is clearly rising. The price retraces (pulls back) toward the MA line but does not break decisively below it. Instead, it finds support at or near the line and resumes its upward path.
Market Implication: This confirms the uptrend's structural health. It indicates that despite temporary profit-taking, underlying demand remains robust, offering a high-probability entry point for trend continuation.
Mechanism: As the price drops toward the "average cost" level, institutional and value-oriented traders view the decline as a discount rather than a reversal. New buyers step in, and existing holders refuse to sell, creating a "floor" of demand that propels the price back up.
4. Failed Rally: Defensive Retreat Under Bearish Pressure
The Pattern: This occurs within an established downtrend where the Moving Average is clearly falling. The price rallies (rebounds) toward the MA line but fails to break above it. Instead, it meets resistance at the line and reverses downward again.
Market Implication: This confirms the downtrend's dominance. It signals that bullish sentiment is too weak to overcome the structural resistance and that the market views any price recovery merely as a liquidity event to exit positions.
Mechanism: As the price rises back to the "average cost" level, traders holding losing positions seize the chance to exit near "break-even," flooding the market with supply. Simultaneously, bears initiate fresh short positions at this resistance level, overwhelming the weak buying interest.
Does price action suggest a confirmed breakout or a failed rally?
When price hits a key moving average, do you add with the trend or wait for confirmation? Which works better for you?
If technical signals conflict with fundamentals or news, which do you trust more — and why?
Leave a comment to earn 10 Tiger Coins, and you’ll also have a chance to win a $5 stock voucher each week!
For the past lessons, you can click to read:
TA Education 1｜Understand Market Signals! How to Spot $MSFT & $TSLA's Uptrend?
TA Education 2｜How to Spot 2 Common Bearish Patterns?
TA Education 3｜2 Common Bearish Patterns - How to Spot Misleading Signals?
TA Education 4｜How to apply MA indicators in live-trading?
TA Education 5｜6 Common MA Patterns — Which One Do You Find Most Useful?
Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.
The 1st approach is more aggressive approach & involves buying or selling immediately the moment the price touches the moving average & assuming the long term trend will continue.
The advantage is you get the best possible entry price if the trend is strong & immediate. However you risk catching a falling knife. This may lead to significant losses if the trend reverses.
The 2nd approach of waiting for confirmation is a more prudent approach. This strategy involves waiting for a signal. This could be a specific candlestick pattern or bounce in momentum indicators, before entering the trade.
This approach reduces the risk & filters out the fakeouts or trend reversals. However you may miss the initial part of the move or get a worse entry price.
I prefer waiting for confirmation as fakeouts and Bull traps are common. Patience pays off.
@Tiger_comments @TigerStars
This is due to :
Failed Momentum: Even though price action recently pushed above resistance levels, this upside move was not confirmed by supporting momentum indicators like RSI or MACD which signals a lack of conviction behind the move.
Low Volume on Breakout : Failed breakouts often occur on weak volume and a significant spike in volume on the reversal suggests a fakeout which can trap traders.
In summary the recent price action of SPY lacks the necessary confirmation such as volume and momentum required for a sustained genuine breakout. Instead it looks like a classic bull trap designed to lure in buyers before a potential reversal or correction.
@Tiger_comments @Tiger_SG @TigerClub @CaptainTiger
When price pulls back to a key MA in a clear trend, I usually add with the trend, but only after a confirming candlestick signal like a bullish engulfing or strong rejection. If price cuts through the MA with momentum, I wait — patience works better than averaging blindly.
When technicals clash with fundamentals or news, I tend to trust price action in the short to medium term. Fundamentals guide conviction, but entries and exits are driven by real capital flow. Ultimately, price action has the final say.
@Tiger_comments @TigerStars
我首先需要股票基本面稳健才能考虑。因此，如果技术信号与基本面或消息相冲突，我仍然会选择基本面。技术面通常是各种投资者共同作用的结果，可能是非理性的。新闻有助于股票向任一方向波动，例如新冠疫情、特朗普解放日、加息和降息有助于创造波动性，帮助我加仓或获利了结。 @Kaixiang @SR050321 @DiAngel @LuckyPiggie @Wayneqq @SPOT_ON @HelenJanet @Universe宇宙 @Success88 @Fenger1188 如何加入
只有当价格保持在先前阻力之上并跟进时，突破才被确认。多次收盘、稳定的结构和成交量支撑比单个高点更重要。如果价格迅速回落至旧区间，则是由动量追逐而非信念驱动的失败反弹。
2.在关键移动平均线处添加
我更愿意等待确认。均线是一个区域，而不是一个信号。当价格表现出可接受性时，例如较高的低点或强劲的收盘价高于平均水平，就会出现较高的上涨概率。首次买入在强劲趋势中有效，但确认可以减少虚假入场和回撤。
3、技术面vs基本面或消息面
这取决于时间框架。从中短期来看，我相信价格和技术面，因为它们反映了真实的定位。中长期来看，基本面引导信心，技术面用于择时。当信号冲突时，我会缩小规模或置身事外。生存先于正确。
模式：這標誌着下行趨勢的重大逆轉。當價格決定性地向下突破已停止上漲、持平並開始小幅上漲的移動平均線時，就會發生這種情況。向下轉彎.
市場含義：它證實了“平均持有成本”正在下降，資本正在退出市場。這種結構性損害表明之前上升趨勢的結束和潛在熊市的開始。
機制：MA此前曾充當買家獲利的支撐位。崩潰表明拋售壓力壓倒了需求。最近的買家現在陷入虧損，引發止損單以及加速價格下跌的恐慌性拋售。
模式：這標誌着趨勢逆轉。當價格決定性地向上突破已停止下跌、持平並開始小幅下跌的移動平均線時，就會發生這種情況。向上轉彎.
市場含義：它證實了“平均持有成本”正在上升，新資本正在支撐市場，標誌着潛在上升趨勢的開始。
機制：由於底層漁民的獲利了結，MA通常充當阻力。一次成功突圍證明強勁的資本流入已經吸收了這種拋售壓力，爲價格上漲掃清了道路。