The usual tendency during a retest is for prices to return to the breakout level…
Which should act as support and attract buying interest.
So, how do you spot high-probability trades during the retest?
Using The “Break and Retest Strategy” To
Capitalize On Opportunities During a Retest
If you’re unfamiliar with the concept, “support” is where buyers step in to push prices higher, while “resistance” is where sellers step in to push prices lower. That said, here’s how the break and retest strategy works relative to support and resistance during a retest.
- Wait for a strong candlestick to break a key support or resistance level, indicating a shift in market sentiment with enough momentum to sustain the breakout.
- Wait for the price to retest to the same level that was broken, now acting as new support or resistance. Then, you can enter a trade in the breakout direction.
- For context, a support break after a downtrend signals an uptrend reversal, while a resistance break after an uptrend indicates the continuation of the upward trend.
Hopefully, that makes sense, but if you need more clarity…
See examples in oil & gas and how we profit from the upside.
One more thing.
The “break and retest strategy” also capitalizes on supply-demand dynamics.
For example, when the key support or resistance level is broken…
It Signals A Shift In Sentiment and
Attracts More Traders To Join The Breakout
However, the price rarely moves in a straight line and often retraces after a breakout.
So, if the broken level holds as new support or resistance, it confirms a genuine breakout.
But if it fails (as often happens), the breakout is likely false, and prices may reverse.
Hence, waiting for the retest helps you not only avoid premature or delayed entries…
But reduce exposure to false signals.
See how we average $2,500 per trade applying this strategy to one oil & gas ETF.