Trend Reversals
Identifying tops and bottoms. Case studies of reversal patterns.
Reversal 1: Double Top Reversal
Structure
Pattern: Double top
Levels: Same high twice
Setup
Step 1: First top at 1.1000
Step 2: Reversal down
Step 3: Second top at 1.1000
Step 4: Breaks below neckline
Analysis
Why reversal worked:
- Double top = strong resistance
- No new high
- Neckline break confirm
Lesson
Double top = reversal high probability.
Wait for neckline break.
Confirm before entry.
Reversal 2: RSI Divergence Bottom
Structure
Pattern: Bearish divergence
Price: Lower low
RSI: Higher low
Setup
Step 1: Price makes lower low
Step 2: RSI makes higher low
Step 3: Divergence forms
Step 4: Trendline break confirms
Analysis
Why reversal worked:
- Divergence = losing momentum
- Price momentum fading
- Confirmation present
Lesson
Divergence = potential reversal.
Wait for confirmation.
Don't trade divergence alone.
Reversal 3: Support-Break Reversal
Structure
Pattern: Support break to bottom
Support: Multiple tests
Setup
Step 1: Support at 1.0500 (3rd test)
Step 2: Price breaks support
Step 3: New low
Step 4: Rejects from below
Analysis
Why reversal worked:
- Too many tests
- Support finally breaks
- New low = reversal
Lesson
Support weakens with tests.
Watch 3rd+ tests.
Break = fail, reversal = confirm.
Reversal 4: Volume Spike Reversal
Structure
Pattern: Volume spike
Price: Spike on reversal
Setup
Step 1: Strong trend up
Step 2: Large volume spike down
Step 3: Bearish candle
Step 4: Trend reversal
Analysis
Why reversal worked:
- Volume spike = exhaustion
- Large sellers entered
- Reversal signal
Lesson
Watch volume spikes.
Exhaustion = reversal.
Confirm with structure.
Key Takeaways
- Double top/bottom — Strong patterns
- Divergences — Momentum failure
- Support breaks — Weakening levels
- Volume — Exhaustion signals
Related
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Reversals identify tops and bottoms.