False Breakout

A False Breakout (or fakeout) occurs when price breaches a well-watched level — a range high, trendline, or pattern boundary — but fails to hold beyond it and quickly reverses back inside the prior range. The traders who entered on the break are now offside, and their forced exits often fuel the reversal.

A false breakout above resistance is a bull trap; a false breakdown below support is a bear trap. The tell is the lack of follow-through: a break on thin volume, an immediate close back inside the range, or a long wick rejecting the level. The deeper structural reason is liquidity — clusters of stop orders and breakout buy/sell orders sit just beyond obvious levels, and a brief push through them lets larger participants fill positions against the crowd before reversing.

• Require a candle close outside the level, not just an intraday poke, to filter most fakeouts.
• A reclaim of the broken level (price closing back inside) is the confirmation that the breakout has failed — and is itself a tradable reversal signal in the opposite direction.
• Round numbers and multi-tested levels attract the most stop liquidity, so they fakeout most often.