Hook Bar Chart Reversal

The hook reversal is the exact opposite of the Key Reversal in the sense that it a condensation of market action which is represented by an inside day. It is not as severe as the outside day since it is not a widely ranging market move, but it does signify market caution. While the hook reversal is not necessary the end of a trend, it does signify caution for traders in the current trending channel. On the flip side, the hook reversal can also represent a market “breather” after heaving trend activity and trading momentum – the market pauses for a period before continuing again in the upwards direction. As with all reversals, confirmation is needed before profits are capitalised on and new trading position are sought.

In an uptrend, the Hook reversal has the following traits:

• The open is below the previous high
• The open is equal to or just below the current high
• The close is above the previous low
• The close is equal to or just above the current low
• The current period has a lower high and a higher low than the previous period

In a downtrend, the Hook reversal has the following traits:

• The open is above the previous low
• The open is equal to or just above the current low
• The close is below the previous high
• The close is equal to or just below the current high
• The current period has a lower high and a higher low than the previous period