Reversal

A reversal occurs when the price direction of an asset changes, shifting from an upward trend to a downward trend or vice versa. Reversals can be triggered by various factors, including changes in market sentiment, economic data, or technical indicators. Traders use reversals to identify potential entry or exit points in the market, as they indicate a shift in the underlying trend. Reversals differ from retracements, which are temporary pauses in a trend rather than a complete change in direction.

Example

A stock that has been rising for several months experiences a reversal after a disappointing earnings report, causing its price to decline sharply.