Key Reversal

Key Reversal on a Stock Chart

The key reversal does not occur very often but is very reliable when it does.

After an up-trend:

  • The Open must be above yesterday's Close,
  • The day must make a new High, and
  • The Close must be below yesterday's Low.

After a down-trend:

  • The Open must be below yesterday's Close,
  • The day must make a new Low, and
  • The Close must be above yesterday's High.

Remember:

The signals are most reliable if they occur after a strong trend. If the trend is weak, so is the signal.

Colin Twiggs

Author: Colin Twiggs is a former investment banker with over 30 years experience in financial markets. He co-founded Incredible Charts and writes the popular Trading Diary newsletter.

Colin also writes The Patient Investor newsletter which focuses on the global economic outlook and key macro trends.

In addition, he founded PVT Capital (AFSL No. 546090) which offers investment strategy and advice to wholesale clients.