Short Term Trend Reversals

Discussion in 'Trading' started by Joe Ross, Sep 11, 2006.

  1. This question was sent to me from one of our students: “Hey Joe! Is there a way to detect short term trend reversals?”

    One sign of a short term trend reversal is: Contraction of the weekly range by 50%, and the highs of successive daily price bars exceeding previous price bar highs by less than 20% of the previous daily range.

    Strong hands, commercials traders and funds, may be selling supply to the small speculators. Strong markets have closes above the previous price bar's high. Watch for a weak Close below the open, mid-range and previous day's Close, when the market is due for a sharp break.

    When some markets begin intermediate reversals, the three week average range will contract 30% or more. Buying above a previous bar’s high is always a high risk proposition, unless strong trending probabilities show sharply higher prices. Wait for the first correction after the previous day's highs have been violated, then enter the market on new intraday strength, or buy the first correction into a support zone anticipating a new higher high before a lower low occurrence. In strong bear markets sell above the previous day's high with a risk determined by range or fixed dollar amount.

    Joe Ross
    Trader, Author