False-breakout level
Also called: false breakout level, fakeout level, failed breakout level
A false-breakout level is the second of the eleven level types in the ChartThread course. A false breakout means the instrument is unable to update the price above a certain high or below a certain low. In the course, update means confirm, and confirm means close. The high or low that price went beyond and could not close beyond is the false-breakout level.
How a false-breakout level forms
- It is an after-the-fact event. You know it is a false breakout only when the candle closes. Until then it may still be a breakout.
- It happens only towards a level. Price has to be trying to update a previous high or low.
- The daily test. It is a false breakout if the candle went beyond yesterday’s low and closed back above it, or went beyond yesterday’s high and closed back below it.
- The previous day as the level. If today’s candle cannot close beyond yesterday’s high or low, that high or low is the level the false breakout happened towards.
Example. Yesterday’s high was 40.00. Today price goes to 40.30 and closes at 39.60. The day could not close above 40.00, so 40.00 is a false-breakout level. With a daily average true range (ATR) of 1.50, the course’s stop is 10% of it, 0.15, so a short from the level has its stop at 40.15.
The tail is not the level
At an extreme, the wick of the false-breakout candle is not a new level. The event was the failure to hold beyond the old price, so the level stays there.
On a real market. Alphabet’s contract set a high of 379.75 on 16 July 2026. On 5 August price went 5.12 above it, to 384.87, and closed back below at 365.29. The level stays at 379.75; 384.87 is only where the push ran out.
Shallow vs deep false breakouts
False breakouts do not weaken a level. A shallow one makes it stronger. Palantir’s contract set a high of 161.52 on 6 March 2026. On 24 March price went 0.90 above it and closed back at 156.70, and by 31 March it was 17% lower. The poke was less than a fifth of the daily ATR of 4.89. A deep false breakout, far past the level, works the other way and weakens it.
| Shallow | Deep | |
|---|---|---|
| How far beyond | A short trip, a small part of the daily ATR | Far past the level |
| Effect on the level | Strengthens it | Weakens it |
False-breakout levels in this course
To trade a false breakout, the course enters after price comes back beyond the level, with the stop behind the false-breakout candle and always behind the level (the point of entry). The type has its own lesson in false-breakout levels. The tail rule is in the candle that forms a level, and the depth rules in shallow false breakouts and deep false breakouts.
Questions about false-breakout level
Where is the level after a false breakout?
At the old high or low that price failed to close beyond. The tail of a false breakout at an extreme is not a level: nothing happened at the tip except that the push ran out. You do not move the line.
Does a false breakout weaken a level?
No. False breakouts do not weaken a level, they make it more powerful. A shallow one, a short trip beyond the level, is one of the signs that strengthen a level. A deep one, far past the level, is a sign that weakens it.
Can a false breakout happen anywhere on the chart?
No. A false breakout can happen only towards a level: a previous high or low that price tried to update. Without a level there is nothing to fail at.
What is the difference between a false breakout and a false-breakout level?
A false breakout is the event: price goes beyond a high or low and closes back. The false-breakout level is the price: the exact high or low the event failed at.