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Trend reversals can unwind extremely slowly, or happen sharply as a strong rejection. Traders must be ready for anything.
Some technical analysis indicators can tip traders off to when assets reach oversold or overbought conditions. This is often a sign that a trend may soon be turning.
Certain chart patterns and candlesticks also can signal a reversal is near. When watching for reversals, however, paying attention to a surge in volume is critical to confirmation.
In the example below, bearish and bullish crossovers on the MACD are used to spot trend reversals.
The next example instead uses a touch of the Parabolic SAR indicator, hence its name “stop and reverse.”
Next, extreme readings on the RSI can signal a reversal.
