Reversal Points

Type

Candlestick Reversal points

How does it work?

Short-term reversal analysis is used to analyse stocks that are one of the six types of common short-term reversals on the analysis date. They are: closing price reversal, open/close reversal, key reversal, hook reversal, island reversal, and pivot point reversal.

The candlestick reversal point analysis identifies reversals based purely on the candlestick theory. It does not involve the volume confirmation. When you see the reversal point on the chart, you should carry out further analysis on its price pattern, trend lines, and appropriate indicators.

The reversal points are plotted on the chart as one of the indicators. You can show reversal points on the chart by selecting “Reversal Points” from the indicator dropdown box on the Stock Selection Bar.

The letter on each reversal point represents the first letter of the reversal pattern. The following is the list of patterns and corresponding symbols that are shown on the chart. . For example, the reversal signal with the letter ‘p’ indicates a pivot point reversal. The following is the list of short-term reversals and corresponding symbols on the chart.

The signals are most reliable if they occur after a strong trend. If the trend is weak, so is the signal.

Short-term Reversal

Symbol on chart

Key reversal

k

Open close reversal

o

Closing price reversal

c

Hook reversal

h

Pivot point reversal

p

Island reversal

i

Settings

Sharechart Default:  3 period

Open-Close Reversal

After an up-trend a new high forms, with the open near the high and the close near the low, the close must be above the prior days close.

After a downtrend a new low forms, with the open near the low and the close near the high, the close must be below the prior days close. 

Closing Price Reversal

After an up-trend, price opens near the high and closes near the low; the close is below the prior days close.

After a downtrend, price opens near the low and closes near the high; the close is above the prior days close.

Key Reversal

The Key Reversal does not occur very often, but it is very reliable when it does.

After an up-trend the open must be above prior days close, the day must make a new high then the close must be below the prior days low.

After a downtrend the open must be below the prior days close, the day must make a new low then the close must be above the prior days high.

Island Reversal

An island reversal is identified by gaps between the signal day and the days to either side, thus forming an island.

After an up-trend the days low is above both the prior day and following days high, forming a gap reversal.

After a downtrend the days high is below both the prior and following days lows, thus forming a gap reversal.

Point Pivot Reversal

One of the most common reversal signals used. The pivot point reversal focuses on the closing price relative to the bar with the highest high (or lowest low).

After an up-trend the close is below the low of the day with the highest high.

After a downtrend the close is above the high of the day with the lowest low.

Note: Complex pivot points can occur where it can take several days to form a pivot.

Hook Reversal

The hook reversal has the same bar as the Open-Close and Closing Price reversals, but it is positioned differently in relation to the range of the previous day. The high and low must be within the trading range (high and low) of the prior days candle.

After an up-trend the open must be near high and the close near the low, but there is a lower high and a higher low compared to the previous day.

After a downtrend the open must be near the low and the close near the high, but there is a lower high and a higher low than the previous day.