1. Price breaks the trend line

When trends form, they always create angles (usually determined by trendlines). The angles with large slopes usually exist only for a short time, then are re-adjusted and are usually stable at 30-45 degrees. When analyzing the slope of a trend we use three types of trend lines:

  • The trend line has a large slope
  • The trend line is of medium slope
  • The trend line has a small slope

When the price breaks a large trend line, it is usually not a sign that the trend is changed as the price can easily be stopped at the trend line on a sloping medium, but this is also a sign. a trend reversal is approaching. When a trendline with a small slope is penetrated with resistance/support it is a fairly convincing sign that the current trend is no longer there.

A breakdown of the small inner trendline is a trend reversal signal, which is confirmed when the big trend line is broken.

2. Resistance - support

Traders need to be familiar with support and resistance levels around the current price, from which one can observe how the trend reacts to these prices. How important are they? This is related to when the price breaks these supportive resistance levels, what is the likelihood that the trend will continue or reverse?

3. Price Pattern

The price pattern is a great clue to how a trend is likely to continue or reverse. Patters that can be mentioned include wedge pattern (bullish/bearish), two / three top/bottom pattern, head and shoulders pattern (forward / reverse). When these patterns appear, Traders should not rush into the market but should wait for the next signals and combine with other factors to get the clearest possible judgment on the trend to decide to order.

The example above has many patterns that you can observe such as the head and shoulders pattern (purple), the head and shoulders pattern reverse (blue), the double vertex pattern forward (the red line above), and a double-bottomed pattern (pink bottom line).

4. Divergence

Divergence occurs when price makes new highs (for an uptrend) or new lows (for a downtrend) but oscillators can't do the same thing. Essentially, these oscillating indicators measure price momentum so when a divergence occurs, there has been a decline in momentum and this is a testament to the possibility of a trend reversal afterward.

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