V.7:10 (347-349): Key reversal days by Peter Aan

Key reversal days by Peter Aan

Note the differences in this bearish pattern, however. Pattern A requires only a lower close than the previous day and does not require that the previous day's low be penetrated. Pattern B does require such a penetration, but does not require the close to be below the previous day's low . Pattern C requires a close below the low of the previous day.

Of course, a simple chart pattern does not necessarily constitute a complete, viable trading system. What I have done in this study is attempt to isolate occurrences of the pattern at points that might become significant tops or bottoms. Therefore, I required that the reversal day be the highest high or lowest low for the most recent n number of days. Other occurrences of the pattern were simply ignored. Because chart traders tend to pay more attention to key reversals at possible tops and bottoms, this should simulate their subjective selection process.