Thursday, March 1, 2012

Did Wednesday's Reversal Bar Mark The Top?

Wednesday’s action saw a new intraday high, an outside day, and a lower close, and it came after a closing high was made the day before. Engulfing reversal bars such as this are often viewed as bearish. I’ve looked at them a number of ways in the past. Below are updated results of one such study.

Results here are similar to other studies I’ve run on outside day or key reversal bars. It is often followed by a few days of weakness but it rarely marks the kind of significant top it is renowned for.

I also ran this study requiring longer-term highs (50 days instead of 10 for instance). This did not have a material impact on the results.

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