A three-peaked pattern (a high peak flanked by two lower peaks) that signals the definitive end of a bullish trend. 3. Indicator Divergence
Relative Strength Index (RSI), Moving Average Convergence Divergence (MACD), and Stochastics. 4. Moving Average Crossovers chapter 8. reversal trading strategies
These patterns take longer to form on a chart and represent a prolonged battle between bulls and bears. A three-peaked pattern (a high peak flanked by
Divergence occurs when the raw price action and a technical indicator disagree, signaling that the current trend is running out of steam. A short-term moving average (e
A short-term moving average (e.g., 50-day) crosses above a long-term moving average (e.g., 200-day). This signals a macro bullish reversal.
If the price makes a new high, but the oscillator (like RSI or MACD) makes a lower high, upward momentum is dying.
True reversals are usually accompanied by a surge in trading volume.