Classic Reversal Pattern

Randy BalcomBlog Post

Here is an example of a reversal pattern with the complete methodology

Think of this trade as an “If-Then”.

  • Weekly charts are used for the big picture. Trend, overbought/oversold and near support and resistance levels
  • Daily is the trade signal
  • 4 hour is for fine tuning the trade

What does the weekly say?

Price is oversold based on the MACDBB

Weekly Chart

What does the daily say?

  • We have a blue square above= Long Dynamic Zone
  • We are showing a potential long trade with a pull back into the sweet spot.
  • MACDBB is below 0= Trade has room to move
  • Ideally, we would want price on the daily to find a bottom around .87152
  • The trade would then be a buy order above .88015 with a stop below the pullback and a target of .90062
  • Ideally it would then be a 2:1 trade
Daily Chart

The “If-Then” part of this trade is:

  • Price has to hold above .8715 for the risk to reward to be close to 2:1
  • There needs to be a clean pullback on the daily
  • Price does not stall out. It makes a clean pullback and a move back up to the entry level

If any of these things are false, skip the trade!