What is a Trend Reversal?

The graph of this pattern indicates that the original trend of the stock price will be reversed, that is, the original stock price trend will be slowed down, but the next trend is uncertain. For example, the original upward trend becomes a downward trend, the original downward trend will become an upward trend, or the original upward or downward trend will become a stable graph before the next change. Typical patterns of the inverted pattern are double top, head and shoulders, straight, dish, and V-shaped.

Reversal pattern

1. There must be major trends.

2. The volume should match the price movement

3. Important trend line

   Reversal pattern is

   In the technical analysis of the broader market or individual stocks, it is very important to analyze the trend. Generally speaking, price patterns can be simply divided into two types, namely reversal patterns and continuous patterns. The two types of patterns have very different technical meanings. The reversal pattern indicates that the market trend of the analysis object is or is about to undergo an important turn, and the directional change will occur in the trend. The continuous pattern indicates that the market trend is changing in shape There will be no change in the process, and the original trend and direction will continue. It may only be a temporary rest process. The overbought or oversold phenomenon in the previous trend can be appropriately corrected through the consolidation pattern.

   Although the analysis of the two patterns has a strong practical value in operation, investors pay more attention to the reversal pattern. There are many types of reversal patterns, including head and shoulder bottom (top), triple bottom or multiple bottom (top), double bottom (top), V-shaped reversal and arc bottom (top). Although the judgment criteria for these reversal patterns are different, they all contain some common characteristics.
   Therefore, before accurately judging and mastering these different reversal patterns, you need to understand several basic points necessary for reversal patterns:
   The first point is that the market must have a clear trend before this pattern. This is a prerequisite for judging any reversal pattern. If the trend of the analysis object before the pattern is more vague, the less likely it is that the pattern will become an inverted pattern. Investors should note that the trend market only includes two cases of uptrend or downtrend. For the non-directional trend of sideways shock consolidation, it is generally not a prerequisite for the reversal pattern.
   The second point is that the most important trend line is effectively broken. In the judgment of the reversal pattern, this is a very important signal that the trend formed over a long period of time is about to reverse. Judging from most of the more standard reversal patterns, the completion of the entire pattern will be accompanied by the phenomenon of the early pressure line or support line being effectively broken.
   If the trend line is not effectively broken when the pattern is near completion, it is very likely that the pattern will evolve into a long-term consolidation pattern. Even if the main trend line is breached, if the breakthrough time is late, in general, the reversal will not occur immediately after the end of the pattern, and it is more likely that the original uptrend or downtrend is sideways. Pattern change. The appearance of the reversal pattern sometimes only indicates the end of the previous trend, but does not guarantee that a new trend will form immediately.
   The third point is that if the reversal pattern is formed at the bottom position, the second half of the upward breakout of the pattern requires the gradual enlargement of the trading volume. Trading volume often plays a key role when major resistance levels are breached. The more ideal the volume and price combination, the stronger its reliability. Regardless of the broad market or individual stocks, when the upward consolidation pattern is coming to an end and the reverse trend pattern is basically formed, most cases will have simultaneous policy or fundamental positives to support the development of the market.
   Finally, the greater the span and volatility of the reversal pattern, the greater the range of market changes after the reversal is formed. The span and fluctuation range of the pattern are distinguished by two factors: fluctuation range and time. Generally speaking, the target position of the future market has a direct positive relationship with the amplitude of the reversal pattern and the brewing time of the pattern. If the gestation time of the pattern is long and the fluctuation range is large, then a large-scale trend-type market may appear thereafter.