Outside Reversal

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DEFINITION of 'Outside Reversal'

A price chart pattern in which a security's high and low prices for the day exceed those of the previous trading session. The outside reversal pattern is called by candlestick chartists and analysts a "bearish engulfing" pattern if the second bar is a down candlestick, and a "bullish engulfing" pattern if the second bar is an up candlestick.

BREAKING DOWN 'Outside Reversal'

An outside reversal is a price pattern used by technical analysts to help identify potential bearish or bullish price movement in a particular market. It occurs where a price bar falls "outside" of the previous price bar, where its high is greater than the previous bar's high and where its low is lower than the previous bar's low. In general, if the outside reversal occurs at a resistance level, it is viewed as a bearish signal; if it occurs at the support level, it is viewed as a bullish signal.

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