The One Day (Week) Reversal

Cho Sing Kum
24^th Jan 2003

After a whole week here, I will be flying back to Singapore early tomorrow morning. As I reflect on the training I have finished giving here in Jakarta in the past few days, I can't help but keep thinking of one particular price pattern that show up on the DJIA at the end of last week. It is that of a One Day Reversal, well in this case it is a One Week Reversal (since on weekly chart) and is one of the topic of the training.

My notes for One Day Reversal is:

Minor Reversal days are referred to by two different names - Key Reversal Days and Outside Reversal Days. They are insufficient in themselves to establish positions. They should be viewed along with other technical information and subsequent price action.

The price action on a Reversal day is quite specific:-

For a Top Reversal Day, a new high is formed above the previous day and a lower low than the previous day is marked. The close should be below the previous day's close and a preferable and stronger indicator would be a close below the previous day's low.

A Bottom Reversal Day is obviously the opposite, with a new low and a higher high followed by a close at least above the previous day's close, preferably above the previous day's high.

As I read the internet forums on Singapore stock market and all the bullish sentiment, I get more worried. The chart below is the DJIA example. Isn't it scary that two One Week Reversal patterns form just weeks apart on the DJIA weekly chart and yet all these people did not even bother to take note? Instead they are getting upset at people who are bearish, wanting people to think the same bullish view as them.

It is true that humans are born failures when it come to money matters. There are many things you just can't change, that you just have to see them suffer over and over again.

As I look at this chart, I can't make myself to be bullish the US stock market. Which direction the price oscillation the next few weeks? Which direction the momentum ahead? The Singapore stock market is not going to escape the consequence.

What is the cause of suffering?

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