DEFINITION of 'Throwback'

A price move back toward the entry level of a security that has broken beyond the barrier of a price pattern or trendline. The retreat toward the level of the breakout is not uncommon and is used by many traders to confirm the validity of the new momentum. Notice how the price in the chart below retests the neckline of the head and shoulders pattern before continuing its move higher.



The move back toward the level of a breakout may be alarming and it causes many to panic and close their position because they think the pattern is not valid. This retest of the breakout level isn't all that bad and is quite common. The successful bounce off the support or resistance actually helps strengthen the pattern and its suggested new direction because it shows that the supply/demand factors of the asset have shifted.

  1. Supply

    A fundamental economic concept that describes the total amount ...
  2. Momentum

    The rate of acceleration of a security's price or volume. The ...
  3. Breakout

    A price movement through an identified level of support or resistance, ...
  4. Trendline

    A line that is drawn over pivot highs or under pivot lows to ...
  5. Demand

    An economic principle that describes a consumer's desire and ...
  6. Head And Shoulders Pattern

    A technical analysis term used to describe a chart formation ...
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