Overview
Price reversals happen when an asset reverses the trend that it is currently in and begins a new trend. This is different than mean reversion, which implies a lot of back and forth motion.
There are two challenges to identifying a price reversal.
- Identifying the reversal point
- Determining that the change in direction is into a new trend as opposed to range trading mean reversion
Indicators
- Breakout - a key indicator that a new trend is forming is a breakout from the current support or resistance level. Remember the adage that support can become resistance.