Determining whether a retest is complete involves evaluating if a market price has revisited a previous support or resistance level, and whether it has sufficiently confirmed or invalidated that level. In trading, a retest refers to the price moving back to a key level after a breakout, aiming to check that it remains a solid area of support or resistance. For a retest to be considered complete, a few conditions typically need to be met:
Price Interaction: The price needs to touch or come near the specific level, which could be a historical high/low, a trend line, or a moving average.
Confirmation Candles: Look for multiple candlesticks or a clear price action signal (like a pin bar, engulfing pattern, or inside bar) that validates the level’s significance.
Volume Analysis: Often, a valid retest will be accompanied by an increase in trading volume, indicating genuine market interest at that level.
Time Frame Consistency: Ensure that the retest holds true across multiple time frames to confirm that the level has broader market recognition.
Subsequent Movement: After the retest, the price should ideally move decisively away from the level, signaling the market’s decision to respect the support or resistance.
If these conditions are on point, traders might conclude that the retesting process is complete, offering a potential trading opportunity based on the confirmed trend direction. Nevertheless, always incorporate risk management and consider external market factors before making a trading decision.
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