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Reversals

Why Trade Reversals?

When it is said that a stock has a reversal, this means that price action has hit a point of resistance where instead of breaking through that resistance like a breakout pattern price action reverses and price begins to move in the opposite direction. There are many reasons for a reversal to happen. That reason could be caused by an individual event for a stock or possibly something happening in the wider market. The reversals that we alert you to are often pretty short holds never really being held for more than a week. The reason for this is that reversals tend to only hold said reversal until price hits a point of resistance and bounces back to its previous price. This risk however gives the opportunity to utilize options to their full potential. Being able to use an option strategy such as a straddle, which takes advantage of any price movement up or down, then sell off a leg of that straddle once price has hit a point of resistance.