Darren Winters of Win Investing explains his Reversal Type 2:
He says “The next reversal is the Dark Cloud Cover – this formation is often seen in current markets where a strong bullish move follows a very strong bearish move.”
Darren adds “Notice how on the first day the market closes very strongly up, almost at the top of its trading range. There is no indication of a reversal to follow. This is what I call, reversal caused by sudden adverse market news just before or just after the market opens.”
After the first day of strong buying, end of day traders place their multiple buy positions for the following day’s open.
Darren explains “this causes the market move slightly upwards following which particular news is announced. This then causes a domino like effect where sellers out compete each other for best price, hence the price plummets. If the news was released overnight or at the end of yesterdays closing day, them market would show a sign of reversal on the first day or would open sharply down (gap at open).”
For Darren Winters