Novice Traders' Notebook  |  NOV 1997

V.15:11 (516-521) The Weekly Reversal by Thomas Bulkowski

What's a weekly reversal and how does it work? Here's a refresher on this intriguing formation. Maybe you’ve felt it. Every once in a while, you feel really good. You begin to believe that you know everything there is to know about a subject. You know that’s not true, but the feeling persists. And such was the case when I started reading analyst John Murphy’s latest work, The Visual Investor. After reading the first chapter, however, I knew I was wrong; I didn’t know everything there was to know about technical analysis. I discovered weekly reversals. So what are they and how well do they really work? I decided to find out. WHAT’S A WEEKLY REVERSAL? Murphy defines a weekly reversal and shows two examples: The weekly reversal is another simple market formation that’s worth looking out for. An upside weekly reversal occurs during a market decline and can be seen only on a weekly bar chart. A stock starts the week with a lot of selling and usually breaks under some type of support level. By week’s end, however, prices have turned dramatically upward and close above the previous week’s price range. The wider the weekly price bar, and the heavier the trading volume, the greater the significance of the turnaround.

by Thomas Bulkowski