Horizontal support and resistance levels are the foundation of any technical analysis. However, traders always face a dilemma here: will the level break or will it bounce? This is not a matter of intuition but the ability to read the market, based on price structure, volume, candlestick behavior, and market context.
Keep on reading to understand when the market is getting ready to break a level, when the probability of a rebound is high, what signals confirm a (false) breakout, and more.
What Is a Horizontal Level?
A horizontal level is a price that has seen an increased number of trades in the past and has become an area of interest for market participants. It can be:
- A support level (where the price is “supported” and turns upward),
- Resistance level (where the price is “resisted” and turns downwards).
What Is a Breakout?
A breakout is a situation when the price confidently crosses the level and consolidates behind it. Here are the signs that the market is ready for a breakout:
Increasing pressure on the level.
- The price approaches the level several times in a row, with each bounce getting weaker and weaker.
- Rising lows in front of resistance (or falling highs in front of support).
- This is a signal of liquidity accumulation and “pressing” the level.
Volumes (if available).
- There is often a volume spike before a breakout.
- In a platform like MetaTrader, the volumes are tick volumes, but even they can tell you when aggressive interest appears (you can also use currency futures volumes).
Closing the candle behind the level.
- This is an important signal. If the candlestick closes above resistance (or below support) with a candlestick body larger than average, it is a serious confirmation of a breakout.
- But it is better to wait for the level retest from the other side to enter with less risk.
Trend context.
- Breakouts happen more often in the direction of the global trend.
- If the price approaches the resistance after a strong upward movement, the probability of a breakdown is higher.
When to Wait for a Rebound?
A rebound is a price reversal from a level. Signs that it is likely to happen:
Weak candles at the level.
- Candles with long shadows are formed, especially pin bars, dojis — signals of uncertainty and possible reversal.
- Small candlestick body + shadow towards the level = a sign of rejection.
Denial of impulse.
- If after touching the level the market sharply reverses and overlaps the body of the test candle, it is a false breakout or a signal for a rebound.
Divergence on indicators.
- For example, the price makes a new maximum at the level, and RSI or MACD shows a decline — a signal of weakening pressure, a reversal is possible.
Let’s Summarize
| Instrument | Helps with the breakout | Helps with rebounding |
| Price Action (pin bars, engulfing, impulse bar) |
impulse candle through the level with a large body | if a candlestick with a shadow from the level |
| Volume | spike on breakdown | volume drop on level test |
| Trend, Bias | breakouts are best considered in the direction of trend | It is better to take a bounce from the level against the trend after a false breakout |
| Divergence | ❌ | ✔️ |
| Flat/Consolidation before the level | ✔️ | ❌ |
Decision Algorithm
- Context: Trend? Flat? Where are we globally?
- Approach to the level: Impulse or accumulation?
- Price behavior at the level: Candlesticks, structure, volume.
- Closing candlestick: Behind the level or rejection?
- Confirmations: Divergences, indicators, false breakouts.
📌 Advice from the Experienced Trader
“Don’t trade on touching a level — trade on the price reaction to it”.
Opening a deal with a limit order on touching a level is a common mistake of beginners. Let the market show the reaction on the level: if it shows strength — expecting breakout. If it shows weakness — expecting rebound.