I do not understand that diagram

Understanding Bullish Breakouts, Fakeouts, and Key Levels
A bullish breakout occurs when the price breaks above a resistance level, signaling potential upward momentum. However, not all breakouts sustain; some can turn into fake breakouts, leading to reversals or pullbacks. Here's how to analyze such scenarios effectively.
---
1. Key Levels to Watch
Resistance:
A price level where the asset struggles to rise above due to selling pressure.
Breakout above resistance suggests bullish momentum.
Support:
A price level where the asset finds buying interest, preventing further decline.
Retesting support after a breakout strengthens the validity of the move.
---
2. Bullish Breakout
Price closes above resistance with a strong, full-bodied candle.
Accompanied by increased trading volume.
Indicates buyers overpowering sellers.
Key Observations in a Breakout:
Entry: Enter when the price closes above resistance or after a successful retest.
Stop Loss: Place below the breakout level or the nearest support to minimize risk.
Target Levels: Use previous highs or Fibonacci extensions to set profit-taking zones.
---
3. Fake Breakout (Rejection from Resistance)
Price momentarily breaks above resistance but fails to sustain and reverses.
Often marked by long wicks and a lack of volume support.
Cause: Weak buying interest or aggressive selling pressure.
Key Observations in a Fake Breakout:
Avoid entering immediately on the breakout; wait for confirmation (candle close or retest).
Monitor for a rejection signal, such as a bearish engulfing pattern or strong downward momentum.
---
4. Resistance Rejection
Price approaches resistance but gets rejected without breaking through.
Signals continuation of the range or potential reversal.
Key Observations:
Avoid long entries near resistance without a breakout confirmation.
Look for potential short opportunities if the rejection is strong and confirmed.
---
How to Trade These Scenarios
1. Bullish Breakout Strategy:
Entry: After confirmation (candle close above resistance or retest).
Stop Loss: Slightly below the breakout or retest level.
Target Levels: Use the range of the breakout or significant resistance zones.
2. Fake Breakout Protection:
Wait for price to retest and hold above the breakout level.
Use indicators like RSI or volume to confirm strength.
3. Rejection Trading Strategy:
Trade the range or reversal near resistance.
Enter short positions on confirmed rejection with a stop loss above resistance.
---
Professional Example
Resistance Level: $12,000
Support Level: $11,500
Breakout Scenario:
Price closes above $12,000 with high volume.
Retest level: $12,000 (previous resistance becomes support).
Target: $12,500 (range height projection).
Stop Loss: Below $11,800.
Fake Breakout Scenario:
Price wicks above $12,000 but closes below.
Avoid long positions until confirmation.
Rejection Scenario:
Price fails to break $12,000 and reverses to $11,500 support.
Enter short near $12,000 resistance.
By understanding these dynamics, traders can improve their entry timing, risk management, and overall profitability.
#XmasCryptoMiracles #crypto2024 #CryptoETFMania #GMTBurnVote #CryptoRegulation2025