Chart PatternsBeginner

Breakout and Retest

How the breakout-and-retest works (resistance becomes support), what makes a valid retest, and how a failed retest turns into a trap.

Library categories

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

BreakoutRetest holdsResistance → supportOld resistance
Price closes above resistance, pulls back to it, holds, and continues: the level flipped to support.

Failed retest

BreakoutFailed retestOld resistance
Price breaks out but the next candle closes back below the level: the breakout failed.Schematic diagrams drawn to explain the idea; they are not market data.

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.

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

Pick an answer to see the explanation. Nothing is saved.

Why wait for the retest?

1. Why wait for the retest?

A close back through the level on the retest is…

2. A close back through the level on the retest is…

Downside of waiting for retests?

3. Downside of waiting for retests?

Practise it risk-free

Open the free chart, use replay to go back in time and look for this concept candle by candle with $20,000 in virtual money.