Retest and Regenerate

The following is the formal definition of the process of retest and regenerate - a core concept in neoclassical technical analysis.

When a swing point is surpassed (up or down), trend necessarily changes (if the prior trend is different the transitioned to trend) or reaffirms (if the breakout is in the direction of the existing trend). In either case, there is a strong probability that retest area (that area represented by the high and the low on the swing point that was surpassed) will witness a retest within six subsequent bars (six days for a daily chart, six weeks for a weekly chart, etc.) This retest area becomes and important consideration for the continuation or termination of trend.

Assuming the breakout is bullish (higher), then a retrace that pulls back to the area that was surpassed with higher prices, will either find support and then continue higher or will fail and fall back into the prior price range. In neoclassical thought, there are telltale signs as to which case is more likely based on time, volume and price. Retest and regenerate provides the astute market observer with additional information concerning the supply and demand equation as it relates to trend and thus, trend continuance or termination.