The key reversal day?

On Thursday the market witnessed what is known as a “key reversal day”. An upside key reversal day occurs when the market opens below (or at) the previous day’s close, falls to take out the previous day’s low and then rebounds to close above the previous day’s high. This does not happen very often and is usually a strong signal that the market is about to reverse. A key reversal day is a signal, and the signal is not confirmed until the market (or stock) closes above the high of the key reversal day.

It also looks like the Dow is trying to find support at the 8000 level. Other markets are also trying to find support. If the markets manage to find support, then we should experience a rally, even if it is a short term one. On the other side, if the market breaks supports, i.e. closes below 8000, then there will be more downside pressure. It’s also good to note that we are heading towards the end of the year, and this is usually the time for the end-of-year rally. As you know, past performance is not necessary an indicator of future performance means the end-of-year rally is not 100% certain.

As we head towards the end of the year, it’s very likely there will be a lot of opportunities which we need to look out for. However we need to make sure that we wait for our indicators to confirm the movement and we should only act if the odds are in our favour.

All the best