Key Reversal Days on the FTSE100

[tomorton]

Just another swing trading thread - I'll start posting key reversal patterns on the FTSE here from today's session onwards, with comments on the relative strength of each signal.

As ever, comments welcome but especially if these focus on identifying optimum exit levels - both for stops and targets.

For those unfamilair with this pattern, also known as engulfing in candlestick TA - e.g. in bearish reversal, 1) price in recognisable uptrend forms 2) outside day bar/candlestick, with higher high but lower low than previous session's: 3) the close is lower than as many significant points of reference as possible, including the day's open, the day's 50% range level, also the previous day's open, close and low 4) price confirms the next day by keeping below the reversal day's high and breaching its low.
Feel free to add your own volume studies to refine these criteria.

Laters - as the yoof of today say.

 

[tomorton]

Looking back over recent weeks there have been 3 outside days on the FTSE: all three telegraphed the subsequent market direction, though none was a true key reversal.

22/11 - 9th session in downtrend but opened with a gap up above the previous session, and closed below it at 5680.8. As the close was lower than the 50% mark of the day's range, this is actually a Whiplash, and was a sell signal. The index fell the next day, eventually dropping 160pts to 5519.2.

24/11 - 11th session in downtrend but opened up on the previous session's close, whereas a nice key reversal would see the day stating with a continuation of the established trend. Price closed up on the day and near its high, so there was bullish indication. Price rose the next day but was unable to break out.

29/11 - Debatable initially whether the downtrend remained intact at this point, the three previous sessions having closed higher than their opens. However, as there waas no clear uptrend either, this could never have been a key reversal. Price closed at the day's low, engulfing the previous session's candlestick, and went lower the next session.

That's what key reversals aren't. Maybe the index will help us with a real one soon.

 

[tomorton]

Bored with this: if I post these signals they will be on another FTSE thread with others.