How far back inside the prior ceiling did the candle close?
Reveal the worked answer
0.80.
Calculate from the supplied OHLC, then distinguish geometry from the uncertain future.
Technical Analysis · TA-02i · Core
Failed breakout
How do you recognize failed breakout without treating it as an automatic entry?
What you will learn and prerequisites
- Read the exact candle geometry.
- Identify prior context.
- State a confirming and an invalidating branch.
Read first: Market structure comes first, Candlestick anatomy and the ten-pattern path
A failed breakout is an excursion above a known boundary followed by a return inside rather than new acceptance above. The testable statement concerns price and location. Calling it a stop hunt adds an intent claim not established by candles.
Put location before the name
The fictional setup occurs after a premarked range ceiling at 102. That reference must be known before identifying the signal; otherwise a trader can invent convenient support or resistance afterward. Match the pattern's timeframe with the context timeframe and state when the bars finish.
The illustration is an original teaching sequence, not an alert, backtest or historical probability. The user's candle panel supplies the syllabus, not a specification for automated trading thresholds.
Read the geometry
The high is 104, two points beyond 102. The close at 101.20 ends 0.80 back inside. This fulfills the example's predeclared close-back-inside rule; one higher print by itself would not have done so.
Walk both next-bar branches
A confirming branch for this particular process is a failed retest of 102 from below. An invalidating branch is a sustained reclaim of 102 with new activity building above. Write both before watching the next interval. Confirmation is additional evidence, not certainty; failure means the original premise needs reassessment.
Even a visually confirmed pattern can offer poor execution economics. Check the next obstacle, spread, available liquidity and consequence of a failed entry. A bullish candle does not automatically justify buying an expensive call, and a bearish one does not justify uncovered short calls.
Read the completed bars
Use these exact data: bar 1: open 101.50, high 104.00, low 100.80, close 101.20. Begin with open and close, then inspect the shadows. Compare completed intervals; do not assume a particular high–low order within one interval.
The high is 104, two points beyond 102. The close at 101.20 ends 0.80 back inside. This fulfills the example's predeclared close-back-inside rule; one higher print by itself would not have done so.
Now rehearse the favorable and adverse branches above. Explain what would change your confidence without changing the already-completed candle. The chart and popup use this same OHLC sequence, so the lesson can be reproduced numerically rather than memorized from a decorative drawing.
Open the calculation without leaving this lesson
Failed breakout—fictional completed intervals
Vertical: USD per share
Horizontal: Completed interval
Hollow body: close at or above open. Filled body: close below open. Neither color is a trade instruction.
Read the graph as a data table
| Interval | Open | High | Low | Close |
|---|---|---|---|---|
| 1 | 101.5 | 104 | 100.8 | 101.2 |
The named shape is not a guarantee
The adverse branch is a sustained reclaim of 102 with new activity building above. Maintaining the original label does not restore the premise. A similar-looking candle in the middle of overlapping range trade may have much less useful context.
Another failure is hindsight selection: locating only successful examples after seeing their outcomes. A usable process needs stated definitions, transaction costs and out-of-sample evaluation before any claimed edge.
Check your understanding
Try the question before revealing its answer. These are reading checks, not trading certification or a site completion record.
Does this pattern establish a profitable options entry?
Reveal the worked answer
No.
Instrument price, time, liquidity and the loss scenario must also be evaluated.
Recognize the failed breakout, locate it, and explain both confirmation and failure before discussing a trade.
Sources, assumptions and downloadable script
External references support definitions and conventions. Worked scenarios and prose are original. No current quotes or dealer inventory are claimed.
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