S/R Pattern Strategy: Separating Bounces and Breakouts at Support/Resistance

In this article, we will look at a support/resistance (S/R) pattern strategy.

We assume you already understand from S/R that:

support and resistance mark areas where balance often shifts,
there are rules of thumb for picking meaningful levels,
and once a level breaks, it can flip roles
(support → resistance, or the other way around).

Here we will use that knowledge and treat S/R as:

a decision zone where you watch
whether price bounces back inside the range
or breaks out into a new move.

From that idea, we will build simple and practical strategy structures.

The diagram below shows:

on the left: price bouncing several times
from a box range bottom (support),
on the right: price breaking below the same support,
then coming back up to retest it as resistance before moving lower.

On the left a box range bottom acting as support with repeated bounces, on the right the same level breaking and then acting as resistance on a retest

The key idea:

at the same level, sometimes you want to trade a bounce (mean reversion),
and in other situations, you want to trade a breakout (trend-following).

1. Think of S/R as zones, not single lines

When you first learn S/R, you usually draw one clean line.
In live trading, it is more realistic to think in terms of zones:

highs/lows often form over several candles,
slightly different levels get rejected in the same area,
different exchanges have slightly different prices.

So in practice, instead of:

“resistance at exactly 19,800”

it is often more useful to think:

“resistance zone around 19,600–20,000.”

This helps you avoid the classic situation:

you put a stop exactly on the line,
price spikes slightly through, hits your stop,
and then moves in your original direction without you.

By using zones, you give the market a bit of breathing room.

2. Two basic strategies at S/R

There are two basic ways to build strategies at S/R:

Bounce strategy (Mean Reversion)
- long near support,
- short near resistance,
- you expect price to return toward the middle or the other side of the range.
Breakout strategy (Trend Following)
- short after a strong break below support,
- long after a strong break above resistance,
- you expect the market to leave the range
  and start a new directional move.

These are essentially:

the simplest versions of Mean Reversion and
Trend Following.

3. Bounce trades at S/R: “Back into the box”

Let’s start with the bounce strategy.

3-1. When does a bounce make more sense?

Bounce trades usually make more sense when:

on the daily chart, price is clearly in a range or slow environment,
DMI/ADX shows
ADX is low or not rising strongly,
Bollinger Bands shows
bands are not extremely wide.

In other words:

“The market is not in a strong trend right now.
It is mostly trading back and forth inside a box.”

3-2. Long example: bounce from support

A simple 1D + 4H structure:

Find the level (daily)
- Use S/R
  to mark a support zone where price has bounced several times.
Watch the approach (4H)
- As price moves down into support,
  see if it slows down or if it just slices straight through.
Look for reaction (4H)
- Use Candle Patterns
  to look for long lower wicks, bullish engulfing, inside bars, etc.
  These suggest selling pressure is fading.
Entry, stop, targets
- Entry: near the close of the 4H candle
  that clearly rejects the support zone.
- Stop:
  - below the support zone, not on the line,
  - you can use ATR
    to add a buffer of around 1.0–1.5 ATR below the zone.
- Targets:
  - first target: mid-range or recent swing high,
  - second target: range top,
  - ideally you want at least around 1:2 R/R.

Short bounce trades work the same way at resistance, just mirrored.

4. Breakout trades at S/R: “Out of the box”

Now let’s look at the breakout strategy.

4-1. When does a breakout make more sense?

Breakout trades often make more sense when:

on the daily chart, you see price building pressure in one direction,
the key level is tested many times,
and highs or lows start to cluster near the level,
DMI/ADX shows
ADX gradually rising.

In simple terms:

“Energy is building around this level,
and it feels like the market is preparing for a bigger move.”

4-2. Example: bearish breakout below support

A simple structure:

Identify major support (daily)
- a zone that produced strong bounces in the past,
- but recent bounces are getting weaker.
Watch the last attempts (4H)
- bounces from support become smaller,
- Candle Patterns show more upper wicks
  and signs of selling at the bottom.
Strong break candle (4H)
- a clear, strong bearish candle
  closes well below the support zone.
Retest and entry
- price may drop straight down,
  but for many traders it is simpler to wait for a retest.
- price comes back up to the old support zone,
  which now acts as resistance.
- you look for a weak bounce into that zone and
  a bearish candle pattern that shows rejection → short candidate.
Stop and targets
- stop: above the retest high + ATR buffer,
- targets:
  - first target: recent swing low,
  - second target: next daily S/R zone below,
- again, try to structure the trade for around 1:2 R/R or better.

Bullish breakouts above resistance are the exact mirror of this.

5. Bounce or breakout? A simple checklist

When you are looking at an S/R zone,
this quick checklist can help:

“On the daily chart,
is this area inside a box,
or at the edge of a box (top/bottom)?”
“Are recent tests of the level
showing weaker bounces,
or still strong reactions?”
“Does the higher timeframe trend
(e.g., - MA 60 Strategy
point in the same direction as a breakout here, or the opposite?”
“Is volatility
(e.g., ATR, Bollinger Bands)
already very high, or still moderate?”

Very roughly:

Bounce trades fit better when
you have a clear range, low ADX, decent previous bounces,
and not-extreme volatility.
Breakout trades fit better when
the market keeps leaning on the level,
building pressure in the direction of the breakout,
with trend tools pointing the same way.

You don’t need perfection.
The point is to avoid always thinking “bounce” or always “breakout”.

6. Common mistakes with S/R pattern strategies

6-1. Drawing too many levels

If you draw S/R everywhere, then:

there is always “some level” near price,
and S/R stops being a tool and becomes an excuse.

Keep it simple:

start with the most obvious levels on the daily chart,
add more only when they clearly matter.

6-2. Entering on the first touch without waiting

“It’s support, so I just buy when it touches,”
“It’s resistance, so I short as soon as it hits.”

This ignores price reaction.
A single strong candle can break the level and stop you out instantly.

Try to keep the sequence:

“Price reaches level → watch reaction → then decide on entry.”

6-3. Chasing breakouts too far from the level

If you enter:

after a big candle has already moved far away from the level,
your stop has to be far,
your target doesn’t give good R/R.

Whenever possible:

waiting for a retest closer to the level
usually makes position sizing and R/R much easier.

7. Questions to ask before trading an S/R pattern

Before taking an S/R-based trade,
it helps to ask:

“Is this level important on the daily chart as well?”
“Is the environment closer to
Trend Following
or Mean Reversion right now?”
“Is my trade direction aligned with the higher timeframe trend
or going against it?”
“Is my stop clearly outside the S/R zone,
not right on the line?”
“Given my stop and target,
does the R/R match my Risk Reward rules?”

The S/R pattern strategy can be summarized as:

“Use support/resistance as a place
to choose between bounce and breakout,
and design your stop/target accordingly.”

If you combine:

Trend Following,
Mean Reversion, and
the S/R pattern ideas in this section,

you can build a framework that helps you decide:

where the important areas are,
which scenario (bounce or breakout) makes more sense, and
whether the trade makes sense from an R/R point of view,

without needing overly complex theory.