Reversal

Dictionary Says

Definition of 'Reversal'

A change in the direction of a price trend. On a price chart, reversals undergo a recognizable change in the price structure. An uptrend, which is a series of higher highs and higher lows, reverses into a downtrend by changing to a series of lower highs and lower lows. A downtrend, which is a series of lower highs and lower lows, reverses into an uptrend by changing to a series of higher highs and higher lows.

Also referred to as a "trend reversal", "rally" or "correction".

Reversal
Investopedia Says

Investopedia explains 'Reversal'

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 or her existing long position and assuming a short position to capitalize on the potential downward movement of the stock's price.

Articles Of Interest

  1. Retracement Or Reversal: Know The Difference

    Learn to distinguish between a temporary price change and a long-term trend.
  2. Trading The MACD Divergence

    Currency traders can use this method to avoid stop-order triggers before the real reversal.
  3. Divergence: The Trade Most Profitable

    Comparing price swings helps traders gain insight into price momentum.
  4. Day Trading Strategies For Beginners

    From picking the right type of stock to setting stop-losses, learn how to trade wisely.
  5. Introduction To Technical Analysis Price Patterns

    To "find your game" in technical analysis, you need to be able to recognize reversals and continuations as they form.
  6. Forex: The Memory Of Price Strategy

    Hate getting stopped out right before the price reverses? This forex trading strategy may help.
  7. Spotting A Market Bottom

    Recognizing a market bottom can lead to huge opportunities for an investor. We go over how you can spot the bottom so that you can reap the rewards.
  8. Candle Sheds More Light Than The MACD

    Read the case against this well-established indicator.
  9. Gauging Major Turns With Psychology

    Knowing what the market is thinking is the best way to determine what it will do next.
  10. Tales From The Trenches: The Rising Wedge Breakdown

    Learn how to short this reversal pattern with a favorable risk/reward ratio.
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