The method of shorting by faking a fall is a strategy for entering short positions after a false breakout in the market. Sometimes, when the price briefly breaks above a previous high, the market can surge violently, often in just a few minutes or even seconds, with a single strong bullish candle pushing up several hundred or even a thousand points, giving the impression that it could take off directly. When we notice that the market breaks upwards through an important resistance level and then quickly returns below the previous high, we use the breaking of the previous high as our entry point for shorting, especially during a relatively topping phase.
The 'fake fall entry shorting method' reflects the saying in the market: 'Beware of false breakouts leading to real breakdowns.' The main funds intend to create a false impression of an upward move before the market actually declines, in order to lure retail investors, while their true intention is to push the market down.
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This contract's price has been rising steadily, entering a phase of sideways consolidation after reaching a temporary high. At this point, we draw a horizontal line at the previous high and find that the price has broken above this high, peaking at 3129 points, then quickly returning below the previous high. The candle that broke the previous high is a typical reversal signal, known as a shooting star (indicated by the circle).
Generally, false breakouts are accompanied by reversal patterns at the top, such as 'shooting star', 'evening star', 'downpour', and 'dark cloud cover'. When we observe that the price has broken above the previous high and then quickly returned below it, we can use this as a basis to enter a short position.
