The Wall Street Playbook

Members who have been here awhile have seen this happen time after time...

We see a bearish ascending wedge, technical traders are taught to go short the wedge near the apex, if it fails before the apex, then it is considered even stronger as we saw briefly at the red arrow. A wedge that breaks out above the apex is considered a failed pattern, so not only are the early shorts knocked out, but they tend to switch their position to long on a failed price pattern, then the market heads lower and takes them out again. It's one of many variations of the head fake and Wall Street makes all kinds of money on it, from the bid/ask spread to volume rebates, to the fact that each stopped out side of the trade, propels the next part of the trade. For example, the early shorts covering helps the Apex breakout, the failure of the apex breakout which has the longs selling at a loss, gives more momentum to the move down. It's win-win for Wall Street.