Failed Breakdown Explained: The Smart Money Reversal Setup (Live Trading Room)

So, we’ll just take it from the top here on the daily. We finished off the day slightly bearish — a near doji day. There was a little bit of uncertainty toward the tail end of the market, but overall, it was kind of a wild ride on the day, coming off Friday’s selloff. We had an inside bullish day here, retracing a little bit. We also had that opening gap up on Sunday night that came into play this morning. We’ll go through that here in just a second.

Today, we had a bit of rejection at the close of yesterday within some of these thin prints here. You can see those thin prints running through the prior week, just below the body during that sell-side imbalance right there — very, very thin prints, ending right before this little high-volume node. Heading into the week, we had these two anchors: this thin print here and this volume gap down here, this weekly opening gap right through here.

This morning, let’s go to the hourly chart to get a better picture. Yesterday was essentially nothing more than a grindfest throughout the day. Then, toward the close, we had that slight pullback and slight rejection here. During the overnight Asian session, we sold straight down, which brought the price all the way down, filling that opening gap. Price then popped out of there a little bit, but right off the open, it went screaming right back down to it.

Now, let’s go to that trade from today. This is that gap-up right here. I’ve marked it just to illustrate, but this is the true failed breakdown we had right through here. Right off the open, you can see price came screaming down, aggressively selling off and running straight to it. We actually filled this gap earlier in the morning session, bounced, and then filled it again before price came screaming back to it.

As price came down here, it was coming in hot — around 2758. The maximum aggressive sellers on this bar were almost 3,000, and about 1,200 of them were erased on this tail wick here. You can see there were 400 trapped buyers in a block right at the bottom of this wick. The next candle opened with more trapped sellers — 245 of them — right at the bottom here. Then the buyers kicked in and reversed the move. From negative 380, it flipped to positive 1922, erasing the entire downtrend and closing right at the gap-up area.

This is a classic failed breakdown pattern. I don’t care how many points it is. The ATR on the day at close was about 12.45. At the time of this move, it was probably around 8.5, so about 8–12 points per 10-minute candle. Price came screaming down, filled the gap, failed the breakdown right at our key level, and never closed below it. Sellers were trapped here, buyers took control, and price re-engaged to the upside.

Price broke back through VWAP — normally, I wait for that before entering, but in this case, I didn’t. The reversal was too strong and too fast. As price came down through, I took it back up to the bullish break at 6659. That was about a 28-point trade on this one.

Hey everyone, it’s Dale here. I hope you enjoyed the video. If you’d like to trade alongside me and our team of prop firm funded traders every day, click the link below the video and hop aboard. We look forward to trading with you.