A diagonal line connecting two or more swing points finally gives way, then price comes back to touch it from the other side before continuing. You're trading the retest, not the initial break.
“Hold yourself to the two most obvious touch points before the break, the ones you'd have drawn without knowing what came next. Skip the trade if you can't point to them cleanly.”Jason Parker · Founder
Every other level on this site is horizontal: VWAP, a prior high, a pivot, a round number. A trendline is the one setup here built on a diagonal, a line drawn through two or more swing highs (in a downtrend) or swing lows (in an uptrend) that price has already respected once. When the line finally breaks, that's information. When price comes back afterward to touch the broken line from the new side and holds, that's the entry, the same support-becomes-resistance idea behind a horizontal retest, just tilted.
The break by itself isn't tradable. Plenty of trendline breaks fail on the first attempt and price climbs right back inside the old channel. The retest is what separates a break that's holding from one that's about to get erased.
| Entry | On the bar that touches the broken trendline from the new side and closes away from it instead of crossing back through |
| Exit | Trail behind the most recent swing point, or take a fixed multiple of the retest bar's own range |
| Stop | Back on the original side of the trendline, since a break that's actually holding shouldn't give up the retest |
An illustrative example built to show the setup’s shape. Not historical price data, and not tied to any specific ticker.
Trendlines are subjective in a way a horizontal level isn't. Two traders looking at the same chart will draw two different lines depending on which swing points they pick, and it's easy to redraw a line after the fact so it lines up with whatever just happened. Hold yourself to the two most obvious touch points before the break, the ones you'd have drawn without knowing what came next, and skip the setup if you can't point to them cleanly. A steep trendline off one sharp move breaks constantly and means little. A shallow one built off several touches over an hour means more.
None of this works without the framework underneath it. Read risk management next, or run your own numbers in the position-size calculator.
Common questions about trading this setup, answered straight.
Entry comes on the bar that touches the broken trendline from the new side and closes away from it instead of crossing back through.
The stop sits back on the original side of the trendline, since a break that's actually holding shouldn't give up the retest. The target trails behind the most recent swing point, or takes a fixed multiple of the retest bar's own range.
Drawing the trendline after the fact so it lines up with whatever just happened. Hold yourself to the two most obvious touch points before the break, the ones you'd have drawn without knowing what came next, and skip the trade if you can't point to them cleanly.
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