L3.2 — Recognising False Breaks and Stop Hunts at Structure

A false break is when price penetrates a swing point or key level but then reverses before closing beyond it. On a candlestick chart, this produces a wick that extends beyond the level with a body that closes back inside the range. This is the most common form of a stop hunt in normal market conditions.

The key diagnostic: was the break confirmed by a candle body close beyond the level, or was it a wick-only penetration? A wick-only penetration at a key structural level — particularly one that snaps back quickly — is a strong signal that the level was swept for liquidity rather than genuinely broken. No structural update is warranted.

The practical implication: do not move your structural labels or invalidate your bias on a wick. Wait for a candle close. This single rule prevents the majority of false-break misreads that cause traders to flip their bias at the worst possible moment — just as price is about to resume the original trend direction.