Why the retest is its own strategy
A direct breakout and a breakout-and-retest enter at different points in time. This version requires an original completed daily breakout above a premarked resistance level, followed by a retest one to five completed sessions later. A trader cannot assume the direct breakout's entry while also claiming the extra information from a later successful retest. That combines the better price of an earlier decision with evidence unavailable until afterward.
Waiting for a retest intentionally misses breakouts that continue without returning. It can also produce a later entry in a breakout that ultimately fails. Neither observation proves the strategy superior or inferior. They describe its selection process, which must remain consistent before any historical comparison is meaningful.
Freeze the original resistance and volume evidence
The resistance line is selected before the breakout. Original breakout volume must be at least 1.5 times the arithmetic mean of the preceding 20 completed daily sessions, excluding the breakout itself. The retest's volume is not used to fill a missing breakout-volume requirement. Save the original line, breakout date, completed close, and volume denominator together.
The retest must occur one through five completed sessions after the breakout. Calendar days are not substituted for trading sessions. A Friday breakout and Monday retest can be one trading session apart despite a three-day calendar difference. An earnings holiday or nonstandard exchange schedule requires the actual trading calendar rather than a simple subtraction of dates.
Define the retest interval and confirmation
The retest low must lie within 0.25 current ATR14 of the original resistance. The retest close must exceed that resistance and its own open. A deep break below the line followed by a rally can fail this particular low-tolerance rule even if the close looks strong. The purpose is not to capture every successful recovery; it is to define one reproducible experiment.
The modeled next-session entry must be no more than 0.5 ATR above the original resistance. This is a separate extension constraint. The retest can qualify while a later proposed entry does not. Changing the original line upward to accommodate a higher entry would defeat the point of freezing the breakout reference.
Walk through a two-session retest
Imagine resistance fixed at $49.50 before an original breakout that closed at $50.20 on 1.6 times its prior volume mean. Two sessions later, the retest has low $49.45, open $49.60, close $49.90, and ATR14 of $1. The low is only $0.05 below the original line, within the $0.25 tolerance. The retest closes above both resistance and open.
A hypothetical $50 next-session entry meets the maximum entry reference of $50. The initial stop is $49.35: retest low minus $0.10. Price risk is $0.65 per share, and the fixed two-distance target is $51.30. The loss budget calculation then incorporates the supplied adverse friction and fixed charges. The gross distance ratio is not a probability estimate.
Now change the retest delay to six sessions. The checker should reject the timing input rather than treating it as the same example. Change the low to $48.90 instead: the price tolerance fails. Change entry to $50.30: the later entry extension fails. Each counterexample changes a different part of the sequence and should produce a distinct explanation.
Recognize how a failed breakout can masquerade as a retest
A declining price near the original line is not automatically a healthy retest. The closing confirmation must still occur. A candle that opens above resistance and closes below it is not rescued by the fact that it traded near the line. A string of repeated tests can also change the interpretation of the original setup, but this version does not add discretionary exceptions after seeing the outcome.
The one-to-five-session window limits the sequence under study. It does not establish that a sixth-session recovery cannot work. If exploring that variant, create a separately labeled rule version and include all its eligible observations. Reporting only the successful longer retests would make the comparison impossible to assess.
Exits preserve the same reference
After entry, a daily close below the original resistance is the failed-retest closing condition. The protective instruction is still checked first. The fixed target and ten-session time exit provide additional endpoints. A later rally after an exit does not erase the earlier invalidation event. Re-entry needs another explicitly defined sequence rather than a retrospective extension of the first attempt.
Stop and target can both be inside one daily bar. A chart of daily OHLC cannot determine which happened first. Nor does a close below resistance establish the fill available when the next instruction was submitted. A full paper or historical implementation must preserve these uncertainties rather than resolving every ambiguous event in favor of the strategy.
Use the tool as a sequence audit
The practical exercise checks the original breakout close, volume ratio, retest delay, low interval, bullish closing confirmation, and changed-entry boundary. Premarking and source reviews remain explicit confirmations. It does not independently retrieve the breakout history or certify that a manually supplied volume ratio used the correct denominator.
The skill being practiced is continuity of evidence across time. Keep the original line fixed, preserve the original breakout record, wait for the specified later observation, and calculate the new proposal from the new entry assumption. A professional strategy record should make those separate moments visible even when the final market outcome is disappointing.
Versioned rule card
EDU-2026-11-v1. These illustrative settings define one educational experiment. They are not optimized parameters, a verified edge, or personal trade instructions.
Entry condition 1: Daily breakout close above a premarked resistance line and breakout volume ratio at least 1.5 versus preceding 20 sessions.
Entry condition 2: Retest occurs one to five completed sessions after breakout.
Entry condition 3: Retest low between resistance minus 0.25 ATR14 and resistance plus 0.25 ATR14.
Entry condition 4: Retest close above resistance and above retest open.
Entry condition 5: Model next-session entry after retest; cancel if it exceeds resistance plus 0.5 ATR14.
Exit rule 1: Modeled stop equals retest low minus 0.1 ATR14.
Exit rule 2: Target equals entry plus two times planned entry-to-stop distance.
Exit rule 3: Protective exit first; otherwise target, then daily close below resistance, then ten-session time exit.
From a rule match to an executable paper plan
A strategy condition and an executable order are different objects. First record the completed observation that satisfied the condition. Then write the earliest moment at which that observation could have been known. A rule requiring the final daily close cannot normally be evaluated early enough to assume a fill at that same closing price. The next session may open above, below, or through the proposed reference. Intraday examples have the same sequencing issue at the boundary between a completed five-minute bar and the next bar. The hypothetical entry used in the exercise is a separate input for exactly this reason.
Write the order instruction before calculating a result. A market instruction emphasizes execution while allowing price uncertainty. A limit instruction imposes a price boundary while accepting nonexecution or partial execution. A stop reference is an activation condition, not an insurance contract. A stop-limit instruction can activate without filling. If a gap skips the reference, the chart does not prove that the position could have been closed at that reference. A realistic paper record therefore preserves the planned price, actual assumed fill, quantity filled, remaining quantity, and the reason for any cancellation. These distinctions are explained further in the site's Trading Basics lessons.
Quantity, costs, and a worked execution budget
For a hypothetical long position, planned price risk per share is entry minus stop. For a hypothetical short, it is stop minus entry. Both expressions must be strictly positive. Suppose a long entry is $50, a stop reference is $48.50, the total adverse-friction assumption is $0.05 per share across the round trip, and fixed round-trip charges are $2. With a modeled $100 loss budget, the arithmetic quantity is floor((100 − 2) / (1.50 + 0.05)), or 63 shares. This models $99.65 of loss at the assumed exit, rather than proving an actual maximum loss.
A separate cash check matters. If only $2,000 is allocated to the share purchase and charges, floor((2000 − 2) / 50) permits 39 shares in this simplified cash calculation. The smaller quantity governs the long example. With those 39 shares, a hypothetical $53 target and the same friction produce 39 × (3 − 0.05) − 2 = $113.05 of modeled net gain. The modeled stop loss is 39 × 1.55 + 2 = $62.45. Their ratio is approximately 1.81. That ratio describes two assumed outcomes; it says nothing about how likely either outcome is.
The exercise uses whole shares and a single fixed-friction assumption to keep the arithmetic visible. Borrow fees, financing, taxes, changing spreads, partial fills, market impact, and a stop skipped by a gap require additional treatment. In particular, the long cash-cap input is not a margin or buying-power model for a short position. Review aggregate exposure and correlated positions using the site's Risk Management learning path before treating any individual-position calculation as a complete portfolio plan.
Exit priority and ambiguous bars
The listed exits describe distinct reasons for leaving. The protective reference is checked first under the illustrative plan; a target or closing-bar condition is considered afterward. However, a daily or five-minute OHLC bar may contain both the stop and target without revealing which was reached first. Do not choose the favorable sequence simply because it improves a result. Use finer trustworthy observations, flag the sequence as unresolved, or apply a disclosed conservative convention consistently. A closing-bar exit cannot be assumed to have prevented an earlier intrabar stop touch.
If a target is fixed at confirmation, preserve that original value. If a strategy explicitly updates a trailing reference, record the update time and make the new value effective only afterward. A revised stop should never be applied retroactively to the bar that generated it. A time exit also needs an execution assumption: submitting an order at a chosen time does not establish that the observed chart price was the actual available fill. Record the difference instead of silently replacing the plan with hindsight.
Review evidence without manufacturing a track record
Start a paper test by freezing the rule version, instrument universe, session definition, time zone, data source, corporate-action treatment, and cost assumptions. Include every eligible observation, including failed conditions and unfilled orders. A collection of attractive screenshots is not a complete sample. Missing data should remain missing rather than being converted into a passing condition. The examples here illustrate mechanics and arithmetic; none of the chart paths establishes a historical win rate or expected future return.
If testing historical data later, separate development observations from a subsequent evaluation period. Record every parameter combination tried so that an attractive result is not presented as an independent discovery after many hidden trials. Include delisted instruments when the universe requires them, avoid using future information to select past leaders, and check how split and dividend adjustments affect price and volume comparisons. These details can change which bars qualify even when the indicator names remain identical. The Technical Analysis lessons provide related material on indicators, reference windows, and disciplined testing.
Using the dedicated practice exercise
Open the exercise linked to this strategy and first review the fictional defaults. Change one assumption at a time. The tool evaluates the supplied numbers and explicitly entered review states; it does not retrieve an independent chart or verify a person's judgment. “Meets entered example conditions” means only that the entered conditions satisfy this particular rule version. “Unresolved” identifies required information that has not been confirmed. A failed condition remains a failed condition even when the hypothetical target result is attractive.
After reviewing the result, preserve the inputs and write which observation changed the conclusion. Repeat with a near-boundary example, a missing requirement, and an adverse execution assumption. Reset restores the fictional example. The worksheet does not send orders, connect a broker, or save a trading account. A repeatable process includes decisions to wait, reject a setup, or investigate an unknown; it is not a requirement to produce a trade every session. The Trading Psychology lessons explain how to review those decisions independently of profit and loss.
Indicator background
For indicator definitions, see Fidelity’s Technical Indicator Guide. The particular thresholds and combinations on this page are our illustrative rule version, not a strategy endorsed or validated by that reference.