Reversal Signals

Technical Analysis

HIVE- I chose to take a position in this stock for a few reasons. By using my knowledge of technical analysis and identifying reversal signals i was able to identify an opportunity in the market. This reversal pattern is something that i have been using at very high probability.

HIVE was a great play because of the price since it was only a $4 stock. When i looked at this chart i noticed several things that meant probable reversal. Firstly, the stock had been getting sold off for a few weeks and months. However when i looked at the chart i noticed a very exaggerated bullish engulfing candle and also it form a hammer candlestick that day, while in the oversold condition. All of these things show great signs of reversing. I also noticed it closed above the 8 exponential moving average. This is a very important part of the strategy as it gives bullish confirmation as i would never enter the trade without this confirmation signal. Once i established a high percentage buy signal i decided to take the trade at $4.09. The goal was to trade the stock all the way up the 50 moving average. When i took this trade i was completely correct with my analysis of the stock. However i miss clicked the button in the game which caused me to take a microscopic of only 1000 shares when i wanted 10000. This mistake caused me to get out with a very small profit even though the stock acted perfectly in going straight to the 50 simple moving average.

     This chart shows the exact trade. As you can see from the chart at the bottom the stochastics show that the stock is in the oversold condition and the green candlestick inside the circle shows a very nice large bullish engulfing candle, but it is also a hammer candlestick. These show an immediate reversal as the stock closed above the blue 8 exponential moving average. As you can see right after this the stock made a 5 day green move to the red 50 simple moving average and the stock has since bounced of the 50 and is still up trending. This move may look small but its is a highly predictable 10% move that is still going higher. A few of these a week at 10% could be very profitable in the long run.



SFM- This trade used the same principles as the one used above. Except this time I looked for a bearish reversal in an overbought condition. In this case SFM is a much more expensive stock than HIVE as its is around $37. However the same reversals signals still apply to any priced stock whether it is a $4 stock or a $30 or a $300 stock the strategy still works in the same manner.

I took this trade as I noticed the stock was uptrending in an overbought condition with a doji candlestick at the top. On top of this the next day gapped down and closed red on the day. This signal shows that the buying pressure has stop and we are reversing into much more selling pressure. Same as the other stock I waited for a close below the 8 exponential moving average now instead of above it because we are looking to short this time. Once a confirmed sell signal took place I took a short position at $37. 33 again expecting the stock to now move lower towards the 50 simple moving average. I eventually closed the position at $35.75 ish before it got to the moving average because it had such a huge morning panic i thought it was worth covering into all the selling and taking nearly $2 a share.

     Here in this chart it shows trade and the downtrend that the stock is now in from this reversal. The "t" looking candlestick in the circle is a doji. This doji shows indecision in the overbought condition. So when the stock gaps down it shows that the bears are in control. Once the stock closes below the blue 8 exponential moving average it is a confirmed reversal. Technically it is ideal to wait for the stock to touch the red 50 simple moving average as it appears that the stock is still headed in that direction. However I wanted to free up some capital for another trade and taking almost $2 a share in the morning panic was a safe way to lock in profits.