The head fake concept...

In an earlier post re: the Ascending Wedge Head Fake

Here are the key take aways...

An Ascending Wedge is a classic chart pattern and they get manipulated a lot because of that, normally they form, traders expect them to break down and retrace their base so many will short the wedge as it comes to its apex, then Wall Street shakes them out with an upside break out, and then the wedge usually falls apart and prices come back down as the wedge originally implied, it's just the shakeout feature Wall Street has added because of the predictability of traders and they can see the full open book of orders and know when traders take the short bait.


a fully formed wedge and the pop straight up out of it is usually the shakeout we see as the shorts now think the bearish wedge is a failed pattern. It doesn't stop there though, the Dogma of Technical Analysis in hundreds of books over the last century has taught traders that when a pattern fails as the ascending wedge right now appears to have, then they should close their position (cover the short) and take the opposite side of the trade (in this case go long). However the head faked wedge, ultimately (usually) does fail, making those traders 2x losers on the same pattern.


And an example of this in the DIA today...

*** The above was posted before any of this started and thus far it has played out as outlined above. Note first the wedge breaks out to the upside, then it moves below the apex, this is the second time the pattern appears to traders to have failed, the first being a break out from a bearish wedge and the second when they reverse to a long position on what they believe to be a failed bearish wedge. Look at the volume spike right under some local support as those long traders got stopped out-probably for the second time.


Most of the averages are losing ground now in AH. The IWM is at $74.55 putting it at virtually unchanged below yesterday's close of $74.61.


The DIA is at $123.73, putting it below yesterday's close of $123.96.


The SPY is at $127.79 just barely above yesterday's close of $127.68


The Q's are at $57.49, for a gain over yesterday on about .60%


All of the averages (ETF) are trading lower in AH. The IWM is notably below afternoon support, the DIA is about at the same place, the SPY is below afternoon support (all of these levels being lower then the wedge's apex or the area in which the upside head fake would be confirmed) and the Q's are only about $.05 above that critical level.


For example, here's the IWM in AH and note there's some significant volume not only for AH, but compared to regular hours.

The light shaded area is after hours, the trendline is below the apex of the wedge and represents last ditch support before the bearish wedge (presumably) fulfills its target which in this case would be a retrace to approximately $73.60 or near today's lows. The dark blue volume is difficult to see, but other then at the very end of the day when the tape is consolidated, they are the biggest volume spikes on the entire chart which covers regular trading hours to the left.