Breakout & Retest

Wait for acceptance beyond a level, then assess whether the retest holds.

Key idea

A breakout is only half the setup. The stronger entry usually comes on the retest — when price returns to the broken level and holds it as new support (or resistance), showing the market has accepted the new range rather than just poked through it.

How to apply it

Confirm the initial breakout with a close beyond the level, ideally with above-average volume.
Wait for price to pull back toward the broken level instead of chasing the initial move.
Look for the retest to hold — smaller candles, reduced downside follow-through, a clean rejection wick.
Set invalidation just beyond the level on the wrong side; if the retest fails and price re-enters the old range, the setup is off.

Confirmation and trade planning

Entry triggerClose back above the broken level on the retest, ideally with a rejection wick

Stop placementJust beyond the retest low — back inside the prior range

Target frameworkRange height projected from the breakout point, or the next structural level

Best useIntraday · Swing

Aggressive versus conservative approach

	Aggressive	Conservative
Trigger	Enter on the initial breakout close	Wait for the retest to hold before entering
Trade-off	Higher false-break risk	Later entry, may miss a fast continuation

Targets are planning references, not forecasts. Position size should be derived from defined account risk and the actual invalidation distance.

Example

A stock breaks above a multi-week resistance zone on strong volume, then pulls back to that same zone two days later. It holds with a small-bodied candle and reclaims to the upside — that retest hold is the higher-quality entry versus chasing the original breakout candle.

Checklist

The initial break closed beyond the level with real participation
I waited for a retest instead of chasing the breakout candle
The retest showed signs of holding (small range, rejection wick)
My invalidation is defined just beyond the level on the failure side

Common mistakes

Chasing the breakout candle at an extended price
Treating any pullback as a valid retest without checking if it holds
Ignoring volume on the initial breakout
Not defining invalidation before entering the retest