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 almost 40 years of experience in financial markets. He co-founded Incredible Charts and writes the popular Trading Diary and Patient Investor newsletters.

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.

Focusing on interest rates and financial market liquidity as primary drivers of the economic cycle, he warned of the 2008/2009 and 2020 bear markets well ahead of actual events.

He founded PVT Capital (AFSL No. 546090) in May 2023, which offers investment strategy and advice to wholesale clients.