N3 · Failed Breakout

Status: LIVE. Canonical id failed_breakout; short code N3 is display metadata only. Implementation: Scoring, State, Triggers. See The Screener System for the long/short family.

A break above a key level that reverses back below it — the bull trap. Trapped longs become forced sellers.

Thesis

A breakout above a well-watched level (prior swing high, range top, round number) recruits momentum buyers. When price fails back below that level shortly after, those buyers are underwater and the level flips from support to a ceiling of trapped supply. The failed breakout is one of the cleaner short triggers because the invalidation is mechanical and tight: the level itself.

Direction

SHORT.

What it looks for (planned triggers)

Price/volume + structure — full-universe capable (no options dependency):

• A recent breakout — a close above an N-day high / identified resistance within the last few sessions.
• The failure — a close back below the breakout level within M sessions (the trap springs).
• Weak breakout volume / strong failure volume — the breakout came on unconvincing volume, or the reclaim-back-below came on heavy volume.
• No reclaim — for primed, price should fail to reclaim the level on a retest, confirming it as resistance rather than a shakeout.

How it scores

Triggers roll up none / partial / primed by count. The “no reclaim” / sustained-below condition gates primed so a one-bar wick below the level (a normal shakeout) doesn’t count as a failed breakout. Confluence with N1 / N2 lifts the rank.

Pitfalls / when it fails

• Shakeout vs failure. The hardest distinction: a brief dip below a breakout level followed by a reclaim is a bullish shakeout, the opposite signal. The reclaim-fails gate is what separates the two — without it this archetype shorts every healthy retest.
• Level definition is everything. A poorly chosen “key level” produces noise. The level must be one the market actually watches (clear prior high / range edge), not an arbitrary line.
• Tight invalidation cuts both ways — the clean stop (back above the level) is a strength, but it also means frequent small stop-outs in choppy tape.

Related

• Implementation signal cards: Score · State · Triggers
• The Screener System (vision)
• Screener Pipeline & Lifecycle (operations)
• Sibling shorts: N1 · Distribution Top, N2 · Overextended Blowoff
• Long-side mirror: A1 · Post-Earnings Overreaction