The article discusses the phenomenon of "breakout and retest play" in financial markets, using Bitcoin (BTC) as an example. It explains that after a convincing move beyond a long-held resistance, assets often return to the breakout point to confirm its validity as support. This retest can serve as a test of strength and potentially lead to bigger rallies.

BTC has experienced a sell-off, dropping over 15% this month and exposing the former resistance-turned-support at $73,835. The article suggests that the downward momentum could run out at or near this level, potentially setting the stage for a larger rally.

The behavioral aspects of investing play a role in this phenomenon, as traders tend to be risk averse and often take profits when they see gains. This can lead to post-breakout rallies abruptly losing steam and a retest of the breakout point.

The article mentions previous examples in 2023 and 2020 where a breakout and retest resulted in bigger rallies to new record highs. However, it also warns that a failed retest or lack of a meaningful bounce can indicate underlying weakness and the potential for a downtrend.

The author highlights examples from traditional markets, such as the yield on the 10-year Japanese government bond and the AUD/USD pair, to further illustrate the breakout and retest phenomenon.



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