Testing a level: clean break vs liquidity grab

Wick beyond, body where

Levels get tested constantly. Most tests resolve in one of two ways. Either the level holds and price reverses. Or the level breaks and price keeps going. The tricky version is the third case — a fake. Price pokes through the level just enough to make you think it broke, triggers stops on the other side, then snaps back. This is called a liquidity grab. Telling a clean break from a liquidity grab is one of the most useful reading skills you can build.

A clean break is straightforward. Price pushes past the level. The candle closes beyond the level — body fully across, not just a wick. The next one or two candles continue in the same direction. The pace of the move stays decisive. By the time you see two closes beyond the level with continuation, the break is confirmed. The old resistance is now potential support and the old support is now potential resistance.

A liquidity grab looks different on the close. Price spikes past the level — sometimes by a meaningful amount. But the candle finishes by closing back inside the original range. The wick is on the far side of the level. The body is on the original side. That is the tell. The market reached past the level to trigger the stops sitting just beyond it, harvested that liquidity, and reversed. The level held, even though it briefly did not look like it.

Why does price reach past a level on purpose? Because stops cluster just beyond every major S/R level. Traders defending the level put their protective stops right outside it. Larger participants know exactly where those stops sit and will sometimes drive price into the cluster to pick them up — call it a stop hunt, a sweep, a liquidity grab. Same mechanic. The good news is the reversal that follows is often a high-quality trade in the opposite direction, because it confirms the level still has real defense.

Recap: a clean break closes beyond the level with follow-through. A liquidity grab wicks beyond but closes back inside. Wait for the close. Wicks lie, bodies tell the truth.