Reversal Patterns

Meaning of Reversal Patterns

Reversal pattern is a transitional phase that marks the turning point between a rising and a falling market. If prices have been advancing, the enthusiasm of buyers has outweighed the pessimism of sellers up to this point, and prices have risen accordingly. During the transition phase, the balance becomes more or less even until finally, for one reason or another, it is tipped in a new direction as the relative weight of selling pushes the trend down.

At the termination of a falling market, the reverse process occurs.

Types/Examples: Double Top, Double Bottom, Triple Top, Tripple Bottom, Head and Shoulder, Inverse Head and Shoulder, Rising Wedge, Falling Wedge, Round Bottom