Bar Reversal Patterns:

When a particular bar or a group of bars combined together speaks for a change in the trend a bar reversal has occurred. If is a reversal phenomenon hence, it will occur only after a prolong rise or a prolong fall. Bar reversals are of four types.

1. Key Reversal
2. Perfect upward bar reversal/ Perfect downward bar reversal
3. Two-day Reversal
4. Island reversal.

1. Key Reversal: –

It must occur after a prolonged fall and is known as bottom key reversal pattern or bullish key reversal pattern.

The previous trend was down so market making lower tops and lower bottom and of course the closing less than opening.

One morning price opens bellow the low of the previous day and falling further, after sometime the falls tops and the prices take and “U” turn. It crosses opening level moves within the body of the previous days bar and finally close at or near the high of the day which in any case got to be higher than the previous close. This incident tells us that the bears are exhausted and bulls are taking control of market. This pattern can also occur at the Top. Known as downward key reversal.

2. Perfect upward bar reversal: –

It is the extended version of key reversal. It is made up of two bars. Where the 2^nd days bar opens bellow the two of the 1^st day and goes up, covers or engulfs, the previous days bar in its totality. So, in this formation, we have a higher high and a lower low. When the pattern occurs at the top it is called perfect down ward bar reversal.

3. Two-day Reversal: –

This is a very common phenomenon in this pattern we have two bars, which are almost are equal in length but different in nature.

4. Island Reversal: –

An island reversal is a modified version of two-day reversal. The only difference of between the two method is that an island reversal is preceded by and followed by gaps.