The New W. D. Gann Technical Review

Vol. 3, No. 4	June 8, 2004
Go to Newsletters Archive

THE REVERSAL AND THE KEY REVERSAL – INDICATIONS OF A TREND CHANGE

Neil Costa

In Volume 3, Number 3, Billy Jones stated “the one most useful indication of a short term or immediate change of trend is the REVERSAL and the KEY REVERSAL. This simple indicator is one of the most powerful and useful of any that I know.”

Billy advised us to:

Watch for any move that is in one direction, up or down, that lasts for three or more days. In this case, let us say the move is down. We have three or more days of lower highs and lows and on the next day the market opens, trades lower making a new low, then reverses and trades above the previous day’s close. This indicates the trend has changed and denotes a KEY REVERSAL. Naturally, closing at the top of the range on the day of the KEY REVERSAL is bullish… In some instances the market doesn’t make a new low or high yet it reverses and closes above the previous day’s close. This is also a sign the trend has changed, at least for the time being.

A graphic illustration of the REVERSAL and the KEY REVERSAL is below:

Billy’s article was written in 1985. A reasonable question one could ask would be “is the key reversal as good an indicator of the change of direction of a market today, almost 20 years later?”

The following chart is a Gann Analyst chart showing a key reversal on a daily spot Live Cattle chart, on May 6, 2004. In this case the Key Reversal bar was also an outside reversal bar. This would have been an even stronger reversal if the market had closed below the low of the previous bar on May 6.

The following chart is a Gann Analyst chart showing a key reversal low on the weekly spot D-Mark on November 3, 2000. The fact that this key reversal occurred on a weekly chart indicates a stronger change of direction.

Finally, key reversals can be found on charts of all liquid markets. The following chart is a Gann Analyst chart showing a key reversal low on a weekly chart of the Westpac Banking Corporation, a stock. Note how often key reversals indicate the end of a move.

ACKNOWLEDGEMENT:

The charts reproduced in this article were produced by Market Analyst 3 software.

DISCLAIMER:

Every effort has been made to ensure that the content and conclusions presented in The New W. D. Gann Technical Review are complete and accurate.

No part of The New W. D. Gann Technical Review contains trading advice - stated or implied, nor is an invitation to trade. The directors and associates of Lambert-Gann Educators, Inc. are NOT licensed trading or investment advisors. Lambert-Gann Educators, Inc. is an organization designed to assist traders and investors to become more knowledgeable and independent.

The giving of advice is therefore contrary to the very objectives of Lambert-Gann Educators, Inc.

Traders requiring trading or investment advice should contact a licensed advisor.
Stockbrokers and futures brokers are licensed advisors.

Neither Lambert-Gann Educators, Inc., nor anyone else involved in the production of The New W. D. Gann Technical Review, will be liable for any liability, loss or damage directly or indirectly caused, or believed to be caused, by The New W. D. Gann Technical Review.

Traders, to be successful, must take full responsibility for their own actions.

With respect to trading results, past performance is not necessarily an indication of future performance.

By maintaining your subscription to The New W. D. Gann Technical Review, you acknowledge that you understand and accept the contents of this disclaimer.

Lambert-Gann Educators, Inc.
1040 Spencer Road
SABINA OH 45169

Copyright © 2002, by Lambert-Gann Educators, Inc. All rights reserved.