When to trust a pullback or retest

The setup is necessary, not sufficient

You can now read a pullback, a correction and a retest, and the candles that end them. The hard part — the pro part — is knowing which ones to TRUST, and the honest answer is: most of what you see, ignore. A dip in a tired, barely-trending market, with no level beneath it and no conviction candle, is a knife. The same dip in a strong trend, into a clean level, closed by a bullish engulfing, is a gift. Same shape, opposite value. Context decides.

The four filters, applied to every dip and retest

The universal filters carry straight over. Location: is price at a real reference — a level, a zone, or a healthy retracement depth, not mid-air? Trend: is the bigger trend genuinely intact, structure not broken on a close? Confirmation: did a candle actually CLOSE rejecting or engulfing in the trend direction — or are you staring at a wick? Risk: is there a tight stop just beyond the swing or level that makes being wrong cheap? One "no", and you pass.

Two checks unique to pullbacks

Pullbacks add two of their own. Depth: a healthy pullback gives back roughly a third to two thirds of the impulse — shallower means a very strong trend, deeper than two thirds is a warning the move may be more than a dip. The structure line: the prior swing low (up) or swing high (down). Held = pullback, you join it; closed beyond = structure broken, a reversal, not a dip. That one line turns "buy the dip or dodge the knife?" into an objective question.

• Most dips and retests should be ignored — the shape is necessary, not sufficient.
• Filter every one: Location, Trend intact, Confirmation (a CLOSE), Risk.
• Healthy depth ≈ a third to two thirds; the prior swing is the reversal line.
• Act on the close, never the wick — the wick is bait.
• A pullback that breaks structure is a reversal signal — trade it, do not fight it.