Why does the market always have 'false breakouts' at critical points? Because capital needs to bet on holding sentiment.
You think the market has made a breakout,
but the funds within the system do not see it that way.
The essence of a 'false breakout' is:
the market is testing whether the demand for funds after the breakout is valid.
When the market breaks through a key point, three things happen:
1. Buy on the rise
2. Short sellers are forced to buy back to stop their losses
3. Existing longs take profits and sell
The question arises:
If the buying power of the longs is insufficient to absorb the third type of selling,
the breakout will fail.
You think it's a false breakout,
but in fact the market is asking a question:
'Is there enough buying power above?
If not, then I’ll retreat and fluctuate first.'
A false breakout is not a trap,
it is simply a natural result of the logic of capital betting.
Understanding this logic, you will know:
A breakout is not a signal, but the 'absorption or pressure' after the breakout is the signal.
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