• Price breaking back above a failed breakdown level.
• Price closing back below a failed breakout level.
• Signs that weak hands have exited, leaving room for a reversal.

Common Pattern Setups

Here are three important setups:

1. ABC Fail Breakout
   • Initial breakout surge (A)
   • Failure swing downward (B)
   • Resolution wave lifting price higher (C)
     Example: Walt Disney’s price action showing a failure swing followed by a new rally high.
2. 50-Day EMA Flush
   • Price moves below the 50-day EMA, then recovers above it
   • Failed breakdown signals a buying opportunity
   • Widely followed indicator acting as dynamic support/resistance
     Example: Apple’s chart behavior confirming this pattern.
3. 62-78.6% Fibonacci Whipsaw
   • Price retraces deeply within a trend (between 62% and 78.6% Fibonacci levels)
   • Price closes back above 62% retracement to enter long
   • Effective on intraday charts with tight stops
     Example: Small-cap biotech Esperion Therapeutics’ breakout and retracement pattern.

Why Failure Patterns Matter

Trading failure patterns means thinking differently:

• You anticipate reversals when others follow momentum blindly.
• You understand how emotions and trader behavior create unique price scenarios.
• You use failure setups to identify high-probability trades that others miss.

Final Thoughts

Mastering failure patterns adds a powerful tool to your trading arsenal. It improves your ability to read charts beyond textbook setups and capitalize on market psychology. Practice these concepts, combine them with your strategy, and watch your trading improve.

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