Break and Retest — Pattern Reference | runic.tools

Identification Rules

A well-defined, previously tested support or resistance level must be present on the chart.
Price breaks decisively through the key level, ideally accompanied by above-average volume confirming genuine breakout momentum.
After the breakout, price retraces back to the broken level rather than continuing immediately in the breakout direction.
The retest candle or candles show rejection at the flipped level — e.g., a pin bar, engulfing candle, or long wick indicating the level is holding.
The breakout and retest setup aligns with the broader trend direction visible on a higher timeframe.
A trending moving average (e.g., 50 EMA) slopes in the direction of the breakout, with price on the correct side of it.

Enter long after a bullish breakout above resistance when price retests the former resistance as new support and a confirmation candle (pin bar, engulfing) closes above that level.
Enter short after a bearish breakout below support when price retests the former support as new resistance and a rejection candle closes below that level.
Limit order entries can be placed at the flipped level in advance once the breakout is confirmed, targeting the precise retest zone.
Market order entries are valid once the confirmation candle closes, accepting a slightly worse fill in exchange for higher certainty the level is holding.

Place stop-loss below the new support level (bullish) or above the new resistance level (bearish), beyond the rejection wick of the confirmation candle.
Alternatively, place stop-loss beyond the last significant swing high (bearish trade) or swing low (bullish trade) prior to the breakout.
A trending moving average such as the 50 EMA can serve as a dynamic stop reference if it aligns with the retest zone.

Set initial take-profit at the next significant swing high (bullish) or swing low (bearish) visible on the trading timeframe.
A minimum 1:2 risk-reward ratio is common; a 1:3 ratio is considered optimal by many practitioners of this strategy.
Partial profit-taking at a 1:1 or 1:2 level, with the remainder trailed to the next structural target, balances consistency with maximizing trend participation.

Higher timeframe trend alignment — breakout direction matches daily or weekly trend.
Above-average volume on the breakout candle confirming genuine market participation.
Fibonacci retracement levels (38.2%, 50%, 61.8%) coinciding with the retest zone.
Rejection candlestick pattern (pin bar, engulfing candle) forming at the retest level.
RSI or MACD momentum indicator aligned with the breakout direction at the time of retest entry.
Multi-timeframe confirmation — breakout visible on a lower timeframe with a strong trend on a higher timeframe.
Fundamental catalyst (economic release, news event) supporting the direction of the breakout.
Retest level coincides with a round number or psychological price level.

Entering on the breakout candle itself rather than waiting for the retest.
Trading break and retest setups in sideways, choppy market conditions.
Placing the stop-loss too tight, inside the natural noise range of the retest zone.
Ignoring volume on the breakout, accepting low-volume breaks as valid.
Over-relying on indicators at the expense of the core price-action structure.
Entering before the confirmation candle fully closes.