Shizi Ang's Technical Analysis Perspective on Trend Reversal Trading Strategies: Three Key Signals of a Downward Structure
1. Resistance Confirmation Signal
When the price rebounds to a previous high resistance area and shows stagnation or a volume reversal candlestick pattern, it indicates that bearish forces are beginning to step in, at which point an initial short position can be established. Special attention should be paid to changes in trading volume and the size of the candlestick body, as these are important criteria for assessing the validity of the resistance.
2. Weak Rebound Structure
If the price makes a second attempt to rise but fails to break through the previous high, forming a bearish structure of "flat lows and lower highs," combined with shrinking trading volume characteristics, it shows that bullish momentum is exhausted. This pattern aligns with the Dow Theory's definition of a downward trend and is an ideal time to increase short positions.
3. Break Confirmation Strategy
After effectively breaking below a key support level, wait for a secondary level retest to confirm the validity of the break. This strategy is based on the principle of "support and resistance conversion" and has a high win rate in trending markets. It is recommended to use Fibonacci retracement levels to assist in judging the strength of the rebound.
Core Trading Logic: Follow the principle of "trading with the trend," patiently waiting for signals of rebound exhaustion in a downward trend, and use a phased approach to position building to control risk. Strictly set stop-loss orders above the recent swing high, maintaining a risk-reward ratio of 1:2 or better. The same applies to bullish operations, with attention to the symmetry of trading direction.
