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| Reversal |
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A sudden change in the price direction of a stock, index, commodity, or derivative security.
Also referred to as a "trend reversal", "rally" or "correction".
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A reversal can be a positive or negative change against the prevailing trend. Technical analysts watch for these patterns because they can indicate the need for a different trading strategy on the same security.
For example, if a technical analyst holds stock ABC and notices a reversal pattern, he or she may want to consider closing his/her existing long position and assuming a short position to capitalize on the potential downward movement of the stock's price.
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