OnLine Cycle Analyst's Seminar - Trend and Price Swings- 2
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Swings show the direction of trend -- in hindsight -- but also show the
continuation of trend. When a swing high is exceeded, the uptrend is continuing.
If a new swing high does not exceed the previous swing high, the uptrend
may be reversing. When a swing low is taken out, the downtrend is continuing.
If a new swing low does not take out a previous swing low, the downtrend
may be reversing.
Follow the swing highs and lows to see if you can identify a pattern or
patterns that identify trend reversals. In this lesson we are only using
swings for trend and trend reversals but in real-time trading the markets,
there are a number of different trading tools and techniques to determine
trend and confirm and trend reversals. Some of these are covered in our
markets analysis that follows.
These specific patterns most often do indicate a trend reversal.
An upside trend
reversal has a mirror image type pattern.
a swing low, prices exceed the previous swing high.
- Drop below
the first swing low
fail to exceed the previous swing high, and drop below the second swing
low to indicate a downside trend reversal.
a swing high, prices drop below the previous swing low.
the previous swing high.
fail to drop below the previous swing low, and rise above the second
swing high to indicate an upside trend reversal.
One technique for determining trend reversals is the standard trendline.
However, 3-point trendliens are much more significant than a 2-point trendline.
In both the uptrend and the downtrend, the 3-point trendline would have
been another contributing factor to the confirmation of a trend reversal.