Volatility Squeeze Fakeouts

The most Violent Reversals

One of our most favorite & profitable ways to use the HTF/LTF Suites is to identify Squeeze Fakeouts. This is when we have the progression of a shaded squeeze breakout as usual: a Volatility Squeeze Shading, then a breakout arrow, but then suddenly a Reversal Bar prints from the Alpha Trend. This is signaling a significant reversal. Remember these are high volatility zones so the reversal here will be much more significant and even more explosive than the normal squeeze breakouts. It also is a way to give you a heads up that you might want to take profit and exit your squeeze breakout trade if you were in one before the reversal bar printed. Note that you will still want to use the confirmation rules outlined in the Alpha Trend section of this Alpha Doc when trading Squeeze Fakeouts.

Below are examples of Squeeze Fakeout trades on Bitcoin. The first one is a Bearish Squeeze Fakeout. You can see we had the normal progression of the Squeeze Breakout trade, but then a Yellow Reversal Bar printed signaling the Fakeout trade setup. It was then confirmed by the following bar closing below it. You can see how powerful these Reversal setups are in the squeeze zone, as it forced price action into Bearish Red Down-trending Bars. This setup could have saved many people all the profits they made in the 2020/2021 crypto bull market.

Example of Squeeze Fakeout. This Fakeout signaled the 2021 Bitcoin/Crypto crash!

Below is an example of the opposite side Squeeze Fakeout - a Bullish Squeeze Fakeout signaled by a Bullish Reversal Bar from the Alpha Trend after a bearish Squeeze Breakout.

Note that you will need both the HTF(Or LTF) as well as the Alpha Trend to be able to identify Squeeze Fakeouts.

Note that confirmation is needed from the Reversal Bar just as we have outlined for you under the Alpha Trend section of this Alpha Docs Guide.