Should I chase the rise after the INJ price breaks through the previous high? How to judge whether it is a true or false breakthrough

After an INJ price breakthrough, assess volume, market conditions, and technical indicators to distinguish true from false signals before chasing the rise.

May 05, 2025 at 07:21 pm

When the price of a cryptocurrency like INJ (Injective Protocol) breaks through a previous high, it can be tempting to jump into the market in hopes of capitalizing on the upward momentum. However, it is crucial to approach such scenarios with caution and a well-thought-out strategy. This article will explore whether you should chase the rise after an INJ price breakthrough and how to distinguish between a true and false breakthrough.

Understanding Price Breakthroughs

A price breakthrough occurs when the price of an asset moves above a significant resistance level, which is a price point that the asset has had difficulty surpassing in the past. When INJ breaks through a previous high, it indicates that the market sentiment might be shifting, and there could be potential for further gains. However, not all breakthroughs are created equal, and it's essential to determine if the breakthrough is genuine or a false signal.

Factors to Consider Before Chasing the Rise

Before deciding to chase the rise after an INJ price breakthrough, consider the following factors:

• Volume: A genuine breakthrough is often accompanied by a significant increase in trading volume. High volume suggests that many market participants are involved in the move, lending credibility to the breakout.

• Market Conditions: Assess the overall market conditions. If the broader cryptocurrency market is experiencing a bullish trend, it might support the INJ price breakthrough. Conversely, if the market is bearish, the breakthrough could be less sustainable.

• Technical Indicators: Utilize technical indicators such as the Relative Strength Index (RSI) and Moving Averages to gauge the strength and potential sustainability of the breakthrough.

• News and Developments: Stay informed about any significant news or developments related to INJ. Positive news can drive a genuine breakthrough, while negative news might lead to a false signal.

Identifying a True Breakthrough

To determine if an INJ price breakthrough is true, follow these steps:

• Confirm with Volume: Check if the breakthrough is accompanied by a noticeable increase in trading volume. A true breakthrough typically sees a surge in volume as more traders enter the market.

• Watch for Retests: After breaking through a resistance level, the price often retests the level to confirm its validity. If the price holds above the previous high after a retest, it strengthens the case for a true breakthrough.

• Monitor Technical Indicators: Use technical indicators to assess the momentum. For instance, if the RSI is not in overbought territory and the Moving Averages are showing a bullish crossover, these signs can support the legitimacy of the breakthrough.

• Analyze Market Sentiment: Gauge the sentiment of the market through social media, forums, and other platforms. Positive sentiment can reinforce the likelihood of a true breakthrough.

Identifying a False Breakthrough

A false breakthrough, also known as a "fakeout," occurs when the price briefly moves above a resistance level but fails to sustain the move. To identify a false breakthrough, consider the following:

• Low Volume: A false breakthrough often lacks the volume needed to sustain the move. If the volume does not increase significantly during the breakthrough, it may be a warning sign.

• Quick Reversal: If the price quickly reverses back below the resistance level after the breakthrough, it suggests that the move was not supported by enough market participants.

• Overbought Conditions: If technical indicators like the RSI indicate overbought conditions, it could signal that the price is due for a correction, increasing the likelihood of a false breakthrough.

• Negative News: Any negative news or developments related to INJ can undermine a breakthrough, leading to a false signal.

Strategies for Chasing the Rise

If you decide to chase the rise after an INJ price breakthrough, consider these strategies:

• Set Clear Entry and Exit Points: Determine your entry point based on the confirmation of a true breakthrough. Set a stop-loss order to manage risk and an exit point to lock in profits.

• Use Technical Analysis: Rely on technical analysis to time your entry and exit. Look for bullish patterns and indicators that support the upward trend.

• Diversify Your Portfolio: Avoid putting all your funds into a single asset. Diversify your cryptocurrency holdings to mitigate risk.

• Stay Informed: Continuously monitor news and market developments that could impact INJ's price. Being well-informed can help you make better trading decisions.

Practical Steps to Assess a Breakthrough

Here are some practical steps you can take to assess whether an INJ price breakthrough is true or false:

• Check Trading Volume:

  • Navigate to your preferred cryptocurrency exchange or trading platform.
  • Find the trading pair for INJ and look at the volume chart.
  • Compare the volume during the breakthrough to the average volume over the past few days or weeks.

• Analyze Price Retests:

  • After the breakthrough, monitor the price closely to see if it retests the previous high.
  • If the price holds above the previous high after a retest, it's a positive sign.

• Use Technical Indicators:

  • Open a charting tool on your trading platform.
  • Add indicators such as the RSI and Moving Averages to the chart.
  • Analyze these indicators to assess the momentum and potential sustainability of the breakthrough.

• Monitor Market Sentiment:

  • Visit social media platforms, forums, and cryptocurrency news sites.
  • Look for discussions and sentiment related to INJ to gauge the market's overall view.

Frequently Asked Questions

Q: How long should I wait to confirm a true breakthrough?

A: It's advisable to wait for at least a few hours to a day after the initial breakthrough to confirm its validity. This period allows you to observe volume, price retests, and other indicators that can help determine if the breakthrough is genuine.

Q: Can false breakthroughs be profitable?

A: While false breakthroughs often lead to price reversals, they can still be profitable if you manage to exit the trade before the reversal occurs. However, trading false breakthroughs is riskier and requires careful monitoring and quick decision-making.

Q: What should I do if I enter a trade based on a false breakthrough?

A: If you enter a trade based on a false breakthrough and the price starts to reverse, it's crucial to act quickly. Use your stop-loss order to limit your losses, and consider exiting the trade to avoid further downside.

Q: Are there any tools or platforms that can help me analyze INJ price breakthroughs?

A: Yes, several tools and platforms can assist with analyzing INJ price breakthroughs. Popular options include TradingView for charting and technical analysis, CoinMarketCap for market data and news, and various cryptocurrency exchanges that offer advanced trading tools and indicators.