A false breakout occurs when price moves beyond a key support or resistance level but fails to sustain momentum, quickly reversing back into the prior range. False breakouts often trap traders who entered on the initial move and are more common in low-volume or choppy market conditions.
Example
“The stock broke above the $150 resistance level but closed back below it by the end of the session — a false breakout that trapped eager buyers who got stopped out on the reversal.”