Tuesday, January 10, 2012


We know that an uptrending market is defined by a series of higher highs and higher lows, but what defines a reversal? Now in order to understand a reversal, you first have to determine its candlestick pattern. First you identify the highest point of the trend where prices are at their highest, then mark the low of that candlestick. The reversal in an uptrend occurs when the low of the highest bar that has been exceeded . The reasoning behind this theory is that buyers become less willing to participate in the directional move which cause for the trend to become exhausted. This pattern may take several days to play out and can be in the form of a coiling pattern. Once the low of the range of candlesticks have been penetrated,the sell signal is given.Many traders make the mistake of shorting a stock when a large move occurs because so often they guess at picking the top. That does not work.The extremity of the candlestick in terms of its high-low range give the most reliable signal because the smaller range candlestick that follows this large bar is where a reversal has greater odds of occuring. 

Do understand that no method of forcasting a reversal is complete without the use of trendline breaks,expected cycle turns, and the duration of the trend.

S&P Daily Chart

S&P Mini- Hourly Chart
Prices tagged the upper end of the rising channel before pulling back.

S&P Daily Chart
Resistance zone = 1293-1308

U.S. Dollar Index
Dollar finding support.

U.S Dollar- Hourly Chart

U.S. Dollar- Bullish Falling Wedge

We're getting close...so hang in there!

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