Key Reversal - This formation regards the changes in price during the day.

It happens when the price makes new highs or new lows.

Observe the price here during a rally.

The security price makes new highs.

But it can not hold it's position and falls back so that it's low is lower than the low of the previous day.

Here you can see the close is lower the the previous days close.

This is called a key reversal.

We can conclude that the price level has been too high and the trend will change.

Investors will sell and a reverse in the price has begun.

The same thing can happen in a down trend.

As you can see here, the price has made new lows, and here it falls to new lows.

But it soon goes back and makes new highs which is higher than the intra day high of the previous day.

You can see the new closing price is higher than the previous day's close.

We can anticipate the down trend has come to it's end and the price direction will change and go up.

When a Key Reversal occurs on the tops we liquidate and close long positions.

When it occurs at the bottoms we close short positions and open long.