TA Education 6｜Breakout or Failed Rally: What Is MA Really Telling You?
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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.
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- koolgal·18:32Excellent idea 🥰🥰🥰LikeReport