Reversal

A change in the prevailing direction of a price trend, from bullish to bearish or vice versa. Identifying reversals early is the holy grail of technical analysis, and traders use tools ranging from candlestick patterns (hammer, engulfing, doji) to indicators (MACD crossovers, RSI divergences) to spot them. The challenge is distinguishing a genuine reversal from a temporary pullback or bounce, and many traders wait for confirmation before committing capital.