What it means
A breakout and retest is a close beyond a level followed by a return to that level from the other side, where it holds. Old resistance acts as support (or old support as resistance).
Why traders use it
Entering on the retest instead of the breakout candle gives a tighter stop and filters some false breaks. The retest shows whether the level really flipped.
Chart examples
Breakout and retest
Failed retest
How to identify it objectively
- 1A clear level with multiple prior reactions.
- 2A close beyond it with a strong body.
- 3A pullback that touches the level from the new side.
- 4A rejection close away from the level.
Bullish use
- 1Close above resistance.
- 2Pullback to it holds.
- 3Bullish close: enter, stop below the retest low.
Bearish use
- 1Close below support.
- 2Rally back to it fails.
- 3Bearish close: enter, stop above the retest high.
What confirms it
- Rejection close on the retest.
- The retest stays near the level.
What invalidates it
- A close back through the level on the retest (failed retest, possible trap).
How a hypothetical setup is built
Entry
On the rejection close at the retest.
Stop
Beyond the retest extreme.
Target
The next level or a measured move.
A hypothetical illustration of how the concept is turned into a plan, not a recommendation. Practise it on a paper account first.
Related concepts
- Market StructureBreak of Structure (BOS)
- Chart PatternsBull and Bear Flags (and Pennants)
- Fair Value Gaps & Order BlocksInverse Fair Value Gap (IFVG)
- Full guide on The TradeskillLiquidity Sweep vs. Accepted Breakout
- Full guide on The TradeskillBull Traps and Bear Traps
Historical testing
Not tested on The Tradeskill. The Session Liquidity Playbook covers the closely related acceptance rule with real gold examples.
Limitations: when it fails
- Strong breakouts often do not retest.
- Deep retests are hard to tell from failures.
- A failed retest can turn into a trap the other way.
Knowledge check
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