A break is a warning

When price closes on the other side of a trendline, that is a break. The traditional reading is that the rhythm of the trend has been disturbed and the existing order is not as strong as it was — and notice that the sentence does not say the trend has reversed. After a break all three scenarios remain open: the trend may change direction, the market may turn sideways, or price may resume its old direction after a short pause. Experienced chart readers therefore treat a break as a warning, never as a conclusion. On a chart you check two things: whether the break happened on a wick or on a close — the close is the period's final verdict and carries more weight — and whether the sequence of highs and lows actually changed afterwards. If the market keeps printing higher highs and higher lows, the definition of the trend is intact even though the line is broken. The common misreading is to declare a reversal the moment the line gives way; one event is never the whole story. For risk literacy a break is a sentence about what to watch, not about what will happen.

This content is educational information, not personalised investment advice. The chart examples are illustrative.

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