equitiesday-tradingintermediate

Price lost the level. Then it took it back.

A failed breakdown reclaim happens when price closes below support, then closes back above it soon after. That reclaiming close is the entry, and a close back below is the stop. The hard part is the minute before. The breakdown looks real, and everything in you says sell.

What is a failed breakdown reclaim?

A failed breakdown reclaim is a support level that price closes below, then closes back above within a few candles. The breakdown failed, and the level is back in play as support.

It matters what the candles did, not just the wicks. A wick that dips under support and snaps back isn't a breakdown at all. The level simply held. A reclaim needs a real candle close below the line, followed by a real close back above it.

That close below is what traps people. Sellers jump in on the break. Buyers who were long get stopped out. When price returns above the level, both groups are wrong at once, and their exits push price higher.

Give extra weight to a reclaim of a level that two different candle patterns marked at the same price. Two reasons for one level is a stronger case than one.

Why the dip below support often looks like a stop run

Obvious support collects stop orders just beneath it. When price dips through, those stops fill as market sells, which can push price lower for a moment.

Some traders read this as a deliberate shakeout. Larger players, the argument goes, push price through a known level to fill their own buy orders against the stops. That's a view of how markets work, not a measured fact, and nobody can prove intent from a chart.

What you can see is the pattern. Price breaks a level that looked important. The follow-through never comes, and price closes back above within a candle or two.

You don't need to know why it happened. You need a rule for what to do when it does, and a rule for when you're wrong.

The entry: a close back above the lost level

Enter on the candle that closes back above the level. Don't buy the dip below it in the hope of a reclaim. Until price closes back above, it's a breakdown.

Use your entry chart for the close, such as the 5-minute. The level itself should come from the daily, 4-hour or 1-hour chart. A reclaim of a level drawn on the 5-minute means much less.

Your stop is a candle close back below the level. A wick under it isn't an exit, since wicks through that level are exactly what started the setup. Note what that rule needs, though. A close-based stop only works on a chart you're watching. Decide how you'll watch before you enter.

Don't wait for a second or third green candle to confirm. Each one moves your entry further from the stop. By the third, the trade may no longer pay.

Does it pay two to one? A worked example

Say support sits at $48.20. A 5-minute candle closes at $47.95, then the next closes at $48.35. The next resistance level up is $49.10.

Your exit is a close back below $48.20. Assume that close could land as low as $48.00. Entering at $48.35 risks 35 cents a share. The target at $49.10 pays 75 cents. That's 75 divided by 35, about 2.1 to 1, so it qualifies.

Now find the latest entry that still pays two to one. Call it E. You need 49.10 minus E to equal twice E minus 48.00. Solve it and 3E equals 145.10, so E is about $48.37.

So if price runs to $48.45 before you act, the trade no longer pays enough. Let it go. Another reclaim will come along.

When to pass on a reclaim

Pass when the higher chart points down. A reclaim against a falling daily trend is a counter-trend trade. It only makes sense at a very strong level, and calling a level strong is a judgment.

Pass when the next resistance sits too close. If it's only a few cents above, there's no room for two to one, however clean the reclaim looks.

Pass when the reclaim candle comes on thin volume. Upside reversals tend to need buyers showing up, and a quiet reclaim often stalls. Selling can move price on fear alone, but buying usually needs volume.

Pass when price chops back and forth across the line. Several closes above and below in a row means the level isn't deciding anything. Treat that area as a zone, and do nothing inside it.

Reclaim checklist before you click buy

Run through this before the order goes in. Any no means no trade. It takes less than a minute once you know your levels.

  • Confirm the level comes from the daily, 4-hour or 1-hour chart.
  • Confirm a full candle closed below it, not just a wick.
  • Wait for a candle to close back above the level.
  • Check the higher chart isn't pointing down.
  • Check volume rose on the reclaim candle.
  • Mark the stop as a close back below the level.
  • Mark the next resistance as the target.
  • Work out the latest entry that still pays two to one.
  • Skip the trade if price is already past that entry.
  • Decide how you'll watch the closes before you enter.

Frequently asked questions

It's when price closes below a support level, then closes back above it soon after. The reclaiming close is a long entry, with a stop on a close back below.

Use a candle close back below the reclaimed level. A wick under it doesn't count, since wicks through the level are what created the setup.

Often, because sellers who shorted the break are trapped and may have to buy back. It still needs room to the next resistance for at least two to one.

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