Breakout and Retest Strategy in Technical Analysis of NEPSE

In Technical Analysis, the Breakout and Retest Strategy is considered one of the most reliable and logical trading techniques, especially for traders who prefer precision over prediction. It helps identify moments when the market shifts from consolidation to momentum — breaking through key support or resistance levels — and then retesting them before continuing the trend. In the Nepal Stock Exchange (NEPSE), where liquidity, investor emotion, and institutional activity heavily influence price movement, this strategy provides traders with a structured and disciplined way to trade high-probability setups.

A breakout happens when the price decisively moves beyond an important level — breaking above resistance or below support — with strength and increased volume. It signals a change in market sentiment: buyers overpowering sellers in an uptrend or vice versa. However, many breakouts fail because retail traders often jump in too early. That’s why the retest phase is vital. After breaking out, the market often pulls back to the same level to confirm whether that broken resistance now acts as support (or a broken support becomes resistance). This “test” phase validates the breakout’s strength and eliminates false entries. When price holds the retest level and shows strong reaction candles (like Bullish Engulfing, Pin Bar, or Rejection Wicks) with rising volume, it confirms institutional participation — a clear sign to enter.

For example, in NEPSE, when a popular stock such as NABIL Bank, NLIC, or Upper Tamakoshi breaks above a resistance zone with strong volume and then retests it, that becomes an ideal entry point for swing or positional traders. Likewise, when a stock breaks below a major support and retests it unsuccessfully, it signals a bearish continuation. The Breakout and Retest Strategy ensures that traders enter after confirmation, not speculation — reducing risk while improving accuracy.

• This method works best with these five principles:
  Identify major support and resistance levels using daily or 4-hour charts.
  Wait for a confirmed breakout candle closing beyond the level.
  Let price retest the breakout zone patiently — don’t rush into trades.
  Watch for confirmation through Price Action and Volume behavior.
  Enter with small risk and proper risk-reward (1:2 or 1:3 ratio).

Sandeep Kumar Chaudhary, Nepal’s leading Technical Analyst and founder of NepseTrading Elite, has popularized this strategy among Nepali traders. With 15+ years of banking and trading experience, and advanced technical training from Singapore and India, he teaches traders that “Patience and confirmation are the real weapons of professional trading.” Through his teachings on Price Action, Smart Money Concepts (SMC), and ICT methodology, he helps traders understand how institutional players use breakouts to trap emotional traders — and how to trade in harmony with smart money.