Technically Speaking Archives
Technical Indicators & Overlays
LATEST TECHNICALLY SPEAKING ARTICLE:
Three Reversal Patterns Every Investor Should Know
October 15, 2016
Technical analysis is the study of historical price and volume data to identify patterns that may indicate future price movement. I consider myself a staunch “fundamentalist” when it comes to buying and selling stocks, meaning I pore over financial statement data and examine trends in various financial ratios and multiples. However, I almost always also look at the stock chart of any stock I am considering. I am going to use all the tools at my disposal, and charting and pattern analysis may help me identify a more advantageous entry or exit point.
Certain chart patterns indicate that the current overall trend is still in place, while others signal that the major underlying trend is coming to an end and about to reverse itself. This installment of Technically Speaking highlights three chart patterns that may signal that the price trend is about to reverse.
Head and Shoulders
The head and shoulders pattern is arguably the best known and probably the most reliable of the reversal patterns. A reversal pattern is one that, when formed, signals that the security is likely to move against the previous trend.
Tracking the cumulative net new highs can help you identify changes in momentum as possible market reversals.