Lesson T4.4 · 4 of 7 · Trend, support and resistance
Breakouts, false breakouts and retests: how to recognise them
A breakout is the price closing beyond a support or resistance zone. It is false when the price quickly returns to the range. A retest is the return to the broken level: in Bulkowski’s tests on US stocks, the price came back to the level within 30 days after 58% of upward breakouts.
Terms in this lesson
- Support and resistance
- Prices at which a stock has often stopped falling or stopped rising.
- Trading volume
- How many shares were bought and sold in a day.
- Stop-loss
- An order that sells automatically if the price falls to a level you choose.
What a breakout is and what volume has to do with it
Definition
What is a breakout?
The price closes clearly beyond a resistance zone (upwards) or a support zone (downwards).
The close is what counts, not a wick that pokes through the level for a few minutes. Many traders want a close a visible distance from the zone, or two closes in a row. The stricter the filter, the less often false breakouts fool you, but the later and higher you get in.
- False breakout
- Breakout
- Retest
The price swings between about 96.5 and 100. At candle 14 it closes at 100.90, above resistance, on the lowest volume on the chart, but the next day it drops back to 99.25 and slides towards 96.5. At candle 27 it closes at 102.20 on about 2.6 times average volume, climbs to 104.2, comes back to 100.30 at candle 32, then rises towards 106.
Textbooks say a breakout on heavy volume is more reliable. Thomas Bulkowski tested the idea on more than 8,000 chart patterns (rectangles, double and triple tops and bottoms) in US shares, from July 1991 to May 2011. The result surprises many people:
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What is a false breakout?
The price gets past the level, then quickly closes back inside the range.
Those who bought the breakout are now sitting on a loss and sell, which can push the price towards the other side of the range. The usual signs: a close barely above the level, a long upper wick, a return within a day or two. Low volume is often mentioned, but as you have seen, it is not a reliable sign.
Have a go: the chart below stops on the day the price closed back below resistance.
- Buying the first wick above the levelA wick is not a close. Wait to see where the day ends.
- Having no plan for a false breakoutDecide in advance: if the price closes back inside the range, you get out.
- Moving your stop-loss lower to “give it more time”A small, known loss turns into a large, unknown one.
Retests: how often the price returns to the broken level
Definition
What is a retest?
After a breakout, the price comes back to the broken level, then moves away again.
Bulkowski calls it a throwback after an upward breakout and a pullback after a downward one, and only counts it if it comes within 30 calendar days. It is the role reversal from the support and resistance lesson: old resistance is being tested as support.
Downward breakouts look similar: 58% of 8,765 had a pullback, and after it the price climbed back above the pattern in 53% of cases. These are historical statistics on US stocks, not guarantees.
Lessons are educational. They are not a recommendation to buy or sell. Investing involves risk and you can lose money. Sources: Thomas N. Bulkowski, thepatternsite.com (Throwbacks, Pullbacks and the breakout-day volume study), accessed on 29 October 2026. The charts are teaching diagrams, not real prices.