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Reversals

Stock price reversals following end-of-the-day price moves█ Stock price reversals following end-of-the-day price moves In the intriguing world of stock trading, the research paper "Stock price reversals following end-of-the-day price moves" by Andrey Kudryavtsev takes a deep dive into the dynamics of stock price behavior, particularly focusing on interday reversals. Key to this study is the exploration of potentially profitable contrarian strategies. Preceding research has shown that these strategies, which bet against the current market trends, can yield significant abnormal returns – approximately 1.7% weekly and 2.5% monthly. The study analyzes thirty stocks from the Dow Jones Industrial Index, focusing on high-to-close and low-to-close price differences. It finds that stocks usually have higher returns following days with significant end-of-day price drops and lower returns after days with end-of-day price rises. These patterns suggest a market correction of overreactions. Based on these findings, the construction of daily-adjusted portfolios shows significantly positive returns, indicating the profitability of trading strategies based on these reversal patterns. █ Research Background and Hypothesis In stock trading, the concept of price overreaction is not new. Prior studies have established that stock prices often overreact to news, leading to a subsequent correction or reversal to a more 'fair' reaction level. This is particularly evident in intraday stock price movements, where overreactions and reversals are commonly observed. To investigate this, the study utilizes high-to-close and low-to-close stock price differences as proxies for end-of-the-day price decreases and increases. These price differences are compared for each stock in the sample and on each trading day. The hypothesis is that the daily return of a stock will be higher if its previous day's high-to-close difference is greater than the low-to-close difference. █ Methodology Let's get into the nuts and bolts. The study focused on thirty stocks that form the Dow Jones Industrial Index. Trading data from January 2, 2002, to September 30, 2011, encompassing 2,456 trading days was analyzed. Kudryavtsev used these stocks' daily high, low, and closing prices, as recorded on finance.yahoo.com. But it wasn't just a straightforward data grab. The prices were meticulously adjusted for dividend payments and stock splits. This adjustment was done by multiplying each actual price by the ratio of the day's reported adjusted closing price (as per Yahoo Finance) to the actual closing price. ⚪ For each stock and for each trading day (except the first day of the sampling period), two key metrics were calculated: High-to-Close Price Difference (RHCit): This measures the difference between the stock’s daily high and closing price. RHCit := math.abs(high - close) / close * 100 Low-to-Close Price Difference (RLCit): The difference between the stock’s daily low and closing price. RLCit := math.abs(low - close) / close * 100 These differences are expressed as absolute percentage price differences, ensuring they are non-negative values. By focusing on these two metrics, the study aimed to capture the essence of the stock's performance and its potential for a reversal the following day. █ Findings and Analysis For most stocks analyzed (28 out of 30), mean daily returns were higher following days with dominant high-to-close price differences, i.e., days closed with price decreases. This trend was statistically significant for most of these stocks, with 22 showing significant mean return differences at the 5% level, including 15 at the 1% level. Furthermore, for most stocks (29 out of 30), mean daily returns were positive when the previous day's high-to-close price difference prevailed and negative when the low-to-close difference did. These results support the study's hypothesis, demonstrating a pattern of reverting behavior in stock prices following end-of-the-day price moves. Such findings contribute to the existing literature on stock price overreactions and market inefficiencies and suggest potentially profitable opportunities for traders who can capitalize on these predictable reversal patterns. █ Implications for Traders Andrey Kudryavtsev's study offers valuable insights for traders, especially those focusing on short-term investments. The key findings highlight a consistent pattern where stocks tend to reverse their price movement the following day after significant end-of-day changes. For traders looking to capitalize on these insights, the study suggests constructing portfolios that adjust daily based on the observed reversal pattern. This involves holding long positions in stocks expected to yield high returns (following large high-to-close price decreases) and short positions in stocks expected to yield low returns (following large low-to-close price increases). By comparing the high-to-close and low-to-close price differences to the mean and median measures for the total sample, traders can identify stocks likely to follow the reversal pattern. This approach could be particularly effective for day traders or those who make frequent, short-term trades, as it leverages the daily fluctuations in stock prices. However, traders need to consider transaction costs and market volatility, which can impact the profitability of such strategies. █ Reference Kudryavtsev, A. (2013). Stock price reversals following end-of-the-day price moves. Economics Letters, 118(3), 203-205 ----------------- Disclaimer This is an educational study for entertainment purposes only. The information in my Scripts/Indicators/Ideas/Algos/Systems does not constitute financial advice or a solicitation to buy or sell securities. I will not accept liability for any loss or damage, including without limitation any loss of profit, which may arise directly or indirectly from the use of or reliance on such information. All investments involve risk, and the past performance of a security, industry, sector, market, financial product, trading strategy, backtest, or individual's trading does not guarantee future results or returns. Investors are fully responsible for any investment decisions they make. Such decisions should be based solely on evaluating their financial circumstances, investment objectives, risk tolerance, and liquidity needs. My Scripts/Indicators/Ideas/Algos/Systems are only for educational purposes!
OANDA:DE30EUREducation
by Zeiierman
3
Tailing with everyone from a buy retrace It’s still a sell but I agree that the retrace is going; since 92$ is now become useful major support from the neckline which is located inside the low 91$ .. luckily it holds but if it breaks it can collapse further. Now for the retrace the correction part from where it’s at now ; meet 100$ area then lastly 111$ area but it’s possible can create a double or triple top in the 120$ Please be very careful it can reverse spike before we notice it off the bat. Safe trading while we are in the buy ; pay attention to the top meet the resistance. FYI: be patient because it will be playing around with the Bollinger bands a bit
BINANCE:SOLUSD
by JoyBoyVegae
1
Double Top Or Higher High? What Do You See?Double tops and higher highs can be synonymous to some traders. I believe that is ok, but they both speak to different Technical Analysis. A trader who trades may not recognize the higher high as following the trend, but rejection. Where as a trader who trades higher highs may see the high as buyers pushing the market higher and will wait for a pullback. I created this video to speak to the technical side of both based on a students price chart. He is doing an amazing job simplifying is trading strategy and I loved his POV. Let me shout out my community Trade On Purpose(recently known as Swing Trader Society). You guys are awesome and I'm grateful y'all allow me to help. Let me know in the comment section below. What do you see, a double top or a double bottom.
Long
by ShaquanLopez
1
HOW-TO: Cosmic Cloud #1📡 INDICATOR Cosmic Cloud 👩‍🏫 HOW-TO CONTENT This how-to shows that even price movement during major events like global market crashes adhere to the indicator levels. ✅ POINTS the price drop starts after reaching a resistance level (top-left chart) or the price drop is confirmed by a downward breakout from one of the support levels the 2020 stock market crash (👑) reaches its lows at various Cosmic Cloud supporting levels 🔔 USEFUL ALERTS Resistance Channel Re-entry ↓ Basis Test ↓↑ Support Channel Entry ↓
TVC:DJIEducation
by cosmic_indicators
End of era news n°35> FDA approves Pfizer vaccine (a great company, diversified, and with a PE ratio < half the S&P 500 one) *********************** Last week the US FDA approved the Pfizer vaccine, which will now be commercialized as Comirnaty. The price to earnings of Pfizer is 20, versus Moderna 50 and the S&P 500 average of 45. Pfizer is well diversified and was relatively cheap even before the latest coronavirus pandemic. What was missing was hype & large growth potential. Lobsters do not age, and bats can repair their dna. The potential is here. This might be one of the companies with the greatest potential ever. RNA technology risks are unknown so we have to assume they are high (or it is gambling) and the reward is also high, very high. They have raised their prices and as anyone that understands high school level science, the coronavirus will continue to naturally select (recombine & mutate) plus antibodies do not last long, so demand will remain high, even if the virus adapts to its hosts (meaning doesn't kill anymore) clients on the other hand will take very long to adapt. One of Pfizer biggest problem, or the biggest, is they quickly lose their patents. The economic model is imperfect and no reason it will change, nothing PFE can do about it. > Who could have predicted this? BOC stops printing money, Canada GDP "surprises" with a decline *********************** Seven weeks after the central bank tapered down its asset purchase program the GDP numbers show a decline of 0.3%. For reminder the last numbers were +9.1% (after the "covid" -11.3% quarter), +2.2%, +1.4%. -0.3% seems like normal continuation of the trend. Western demographics are terrible and growth is over as some people have predicted. It's ok they can come up with excuses like "covid". We can speculate the central bank might increase it's helicopter program. Who knows, they might have seen the negative numbers coming and perhaps they reduces the money printing to make it look like that's the reason for negative numbers "the economy was not ready bla bla bla". In reality the whole civilization is in a secular bear market that will last anywhere from 30 years to 150. > End of era: UK spy calls Afghanistan events "end of of an era of western liberalism and democracy" *********************** According to a jounalist a UK senior former UK intelligence officer said about Afghanistan: "This marks the end of an era of Western liberalism & democracy that started with the fall of the Berlin Wall. It is a defeat of Western ideology." Spies are conspiracy theorists times 10. They know wht's going on. Other former spies have made similar comments about the fall of the west in the past, mostly russian and including Vladimir Putin, he is not retired but he is a former spy. Big change, big uncertainty (for regular people) = big risk and big profits right? > End of era: Biden announces 'end of era' for US interference abroad. American isolationism continues! *********************** Biden words. Freudian slip? Huh you think governments and lawmakers are aware of their ideoloy being close to crumbling, just like communism in the USSR did, and the leaders knew about it at least 10 years before it happened. The US president said the world may be quieter in the future. Russian foreign minister Lavrov said "Both of them (Biden & Macron), with a gap of just one or two days, announced that it was time to wrap up interference in the internal affairs of other countries with aims to impose Western-style democracy on them." and has called "the moment very interesting". If the US leaves Iran alone, can we expect more competition among Oil producers? Maybe Iran steps in violently and begins a price war to show "hey we are here, we mean business". > End of era: Nasdaq bubble indice inches from surpassing german DAX 30 for the first time in history *********************** All the day traders are sweating, well actually they are not because most day traders are really bad. You can't be that good if you even choose this garbage tier activity. The Dax they love to day trade is not what it used to be. The DAX has been ranging in a tight range for a whole 5 months. This is around the average entire career duration of all these day traders. And it might not be getting looked at by banks etc as much as it used to. So what little self fulfilling prophecy trends it used to have might not come back. But does it matter? 99.9% don't make money anyway, 0.1% underperform the market, and 99% will quit, so does it even matter? They can keep playing with their casino video game, and they probably won't notice if indeed it is over before many years. Who knows how many years. 10? 20? 30? Maybe attention moves to the hysterical Nasdaq indice, of which value is so close to surpassing the DAX. The ratio has never been so high. It's ridiculous to think that California GDP is at 3 trillion so close to Germany's 3.8 trillion. And above UK & France declining 2.6-2.7 GDPs. California has tons of issues and thanks to US isolationism which is a fundamental trend, sitting above who people vote for, big tech will lose its worldwide monopoly. > Holidays are over, price action might get violent next week, or even tomorrow with non farm payrolls *********************** I haven't had any "quick" investments since February which itself followed a boring period with little happening. Nothing below 2 weeks. But in september money managers go back to the office these lazy normie bums. You should not be allowed to participate in an elitist competition if you want a pointless "normal" life. In my short experience September has some violent moves, fast and that go past targets. In french is it called "la rentrée", why don't english have a term? They're going to keep repeating whole sentences each time for when people go back to work in September? Just copy the french word, isn't that what they usually do? Or spanish, what is it they say for "el comienzo del año escolar"? "La reanudación" 🤢? Is this used? French is shorter, use that one. As Deng XiaoGeorge SorosNewton said "a truck something something doesn't stop on it's own". Mutual fund managers, Hedge fund traders, all these type of people, they are not very good at investing, and why should they? Not their job. But they are good at attracting client's money, making "reunions", and following crippling regulations meant to protect brainless fund clients. It's mainly hedge funds, they are the ones focussed on the short term. In these reunions subject such as "Our investment XYZ has appreciated we should take profit in our tax haven subsidy", "We need to hedge our risk by opening more Oil positions", "DUDE THE S&P IS GOING TO THE MOON BUY BUY BUY! SPIEL!" Breakouts and reversals. For the handful of individual investors out there that don't day or "swing" (1-3 days) trade don't end up on the wrong side, don't be slow to react. I'm catching myself rubbing my hands every now and then. Will feel good to have some quick ones for a change (even if they're not that good), can't take the waiting anymore, and hopefully plenty of setups. And please oh please god of markets allow the S&P 500 to break and go vertical. 💰💰💰
by MrRenev
GBPUSD long progressing ⤴️☝️Trade details are shown on the chart. We are working the 15M time frame on this strategy. We're looking for the green line which is take profit target. Little blue arrow is entry point and purple line is stop loss. Trade has been live since 14:00 UK time. Trade history can be seen at the foot of this trade idea too for full transparency. ------------------------------------------ I try and share as many ideas as I can as and when I have time. My trades are automated so I am not sat in front of a screen daily. Jumping on random trade ideas 'willy-nilly' on Trading View trying to find that one trade that you can retire from is not a sustainable way to trade. You might get lucky, but it will always end one way. ------------------------------------------ Please hit the 👍 LIKE button if you like my ideas🙏 Also follow my profile, then you will receive a notification whenever I post a trading idea - so you don't miss them. 🙌 No one likes missing out, do they? Also, see my 'related ideas' below to see more just like this. The stats for this pair are shown below too. Thank you. Darren
Long
by pow_removetheguesswork
1
Poor Reversals GuidePoor Reversals Indicator This indicator finds Poor Reversals. Poor reversals are reversals in price with consecutive highs or lows that are close together. Look for the different types of highs and lows. Some say candle patterns don't matter, but they forget it's the orderflow that makes the pattern. Find poor, tweezer , and 1 tic rejections and study what happens next. We don't need to read the depth of market to see what the orderflow is saying. They are called poor because the auction didn't run its course. It didn't continue the direction until all activity in that direction was exhausted. Proper reversals create excess. Excess is a long tail/wick. A proper reversal leaves a long tailed excess unfilled. The different highs and lows give clues to what kind of orderflow happened there. The difference between them is which high or low happened first. Price does often come back to these areas and clears them up with a proper reversal. We can see them on all timeframes. Knowing what they mean in the orderflow helps with reading charts. The Poor Reversals are: Poor 1 Tick Rejection Tweezer When looking at 2 bars that have very close high or lows, there are a few different types. They are each poor and can be further defined as each are price action clues. If next low is higher, it's a poor low If next low is lower, it's 1 tic rejection If next low is equal, it's tweezer bottom If next high is lower, it's a poor low If next high is higher it's 1 tic rejection If next high is equal it's tweezer top Poor Highs and Lows: The high or low comes first. The next bar does not go past it. Poor highs and lows are often created from price exhaustions. This means at poor highs buyers are trapped. At poor lows sellers are trapped. Price ran out of steam to continue in that direction. There wasn't enough activity/participation to continue the auction in that direction. Poor lows are defined when 2 lows are very close, and the 1st bar is lower. The 2nd comes very close to a new low. It happens most when shorts, at the moment, "run out of steam". They were "too aggressive" and got themselves "short in the hole". When a poor low is made, price will bounce because shorts are buying to protect profits. Poor highs are defined when 2 highs are very close. The 1st bar is higher. The 2nd comes very close to a new high. It happens most when longs, at the moment, "run out of steam". They were "too aggressive" and got themselves "long in the tooth". When a poor high is made, price will pullback because longs are selling to protect profits. 1 Tick Rejections: The high or low comes last. The last bar goes just a little bit beyond the first bar. A "1 tic rejection" happens when a new low is made and quickly rejects. The name is misleading. It doesn't have to be "1 tic". Different markets have different measurements. For ES, it's less than 8 tics. For NQ, it's about 5-20 points. It varies depending on relative market volatility . 1 Tick highs are defined when 2 highs are very close, and the 1st high is lower. The second high is a small peek above. This happens when longs are aggressive and drive price up. Price makes a newer high and longs rapidly start taking profits. Their selling activity drives price lower. In the orderflow, longs likely closed at the same time new shorts sell. This competition to sell drives price lower. At the high, it says longs saw it wouldn't go higher and they took rapid exit. 1 Tick lows are defined when 2 lows are very close, and the 1st low is higher. The second low is a small peek below. This happens when shorts are aggressive and drive price down. Price makes a newer low and shorts rapidly start taking profits. Their buying activity drives price higher. In the orderflow, shorts likely closed at the same time new longs buy. This competition to buy drives price higher. At the low, it says shorts saw it wouldn't go lower and they took rapid exit. Tweezer Tops and Bottoms The highs or lows of the bars are equal. Tweezers most often mean that an aggressive trader is influencing price. They drove price in one direction and then quickly reversed sentiment. Tweezers most often happen in stop hunts. An aggressive trader found where the stops were located and then entered an aggressive order to turn the market. Tweezer Tops are defined when 2 highs are equal. The first bar sets the high. The second bar matches the high. This happens when there is an active seller entering. It could be simple profit taking from longs or new aggressive shorts. In price action, price will move up to find short stops. When the stops are found, the market reverses sharply lower. Tweezer Bottoms are defined when 2 lows are equal. The first bar sets the low. The second bar matches the low. This happens when there is an active buyer entering. It could be simple profit taking from shorts or new aggressive longs. In price action, price will move down to find long stops. When the stops are found, the market reverses sharply higher. Poor Reversals can be Poor, 1 Tick Rejections, or Tweezers. They are all considered poor and upon further investigation we can see they are created from different conditions in the orderflow. They are not called Poor Reversals because they are weak. They are called poor because of the action that happened there. One side got caught in a bad position. Other sharks in the market smelled blood and ripped them apart. This indicator is a work in process. While the concepts are great for real time trading, this indicator is not designed to be used in real time trading. It will repaint based on the bar close. The purpose of this indicator is to train our brains to see these nuances on candle charts. Some say candle patterns don't matter, but they forget it's the orderflow that makes the pattern. We must make split second decisions and knowing the context behind the orderflow reduces response time. These poor reversals don't have to retest, and the best ones won't come back. I use these concepts to find exits, where my trades might be wrong, confirmation I'm on the right side. It's amazing how these simple nuances can turn the markets. But sure enough, they do. Check them out in all time frames. It's a fun indicator to play with. Some markets do require tweaks to the “Ticks” setting. Too big and charts will be noisy. Too low and not much will show up. A general rule of thumb is more volatile markets need higher tick values while less volatile need lower Tick values. Higher timeframes are also more reliable than lower time frames. I've included some customizable settings and I plan on adding more in the future. Enjoy!
CME_MINI:ES1!Education
by CoreySurles
1
I'm shorting GBPUSD Is anyone else 🙋‍♂️🙌Trade label on the chart shows full details. We are working the 15M time frame on this strategy. We're looking for the green line which is take profit target. Little red arrow is entry point and purple line is stop loss. Trade history can be seen below this trade idea too for full transparency. ------------------------------------------ I try and share as many ideas as I can as and when I have time. My trades are automated so I am not sat in front of a screen daily. Jumping on random trade ideas 'willy-nilly' on Trading View trying to find that one trade that you can retire from is not a sustainable way to trade. You might get lucky, but it will always end one way. ------------------------------------------ Please hit the 👍 LIKE button if you like my ideas🙏 Also follow my profile, then you will receive a notification whenever I post a trading idea - so you don't miss them. 🙌 No one likes missing out, do they? Also, see my 'related ideas' below to see more just like this. The stats for this pair are shown below too. Thank you. Darren
Short
by pow_removetheguesswork
2
Divergences Explained by a RaccoonThis video's purpose is to go over the fundamentals of divergences. How to spot them and the effects they have. I might make a video later on practical application and how to trade them; as well as how to combine them with other technical analysis tools and techniques. And I should be doing a stream soon where we just spend an hour hunting divergences on different commodities; whether it's crytpo, stonks, or forex. I hope this helps those trying to understand divergences. Let me know if anything seems off or is confusing, I am more than happy to make another video to clarify anything that seems off or incomplete. Thanks for watching.
Editors' picks
FTX:BTCUSDEducation
by GR3ND3L
61
Positioning myself for bullish bias on goldThis week ill be looking for potential buy's around 1736-1738 on condition that the market gives proper confluence such as rejections to the downside ( hammers and dojis ) I'll also be keeping an eye out for another stop hunt low( Not likely to happen but this is a market based off probability not accuracy ) My target level for this gold trade to complete my Daily levels is 1780 but keep in mind I've been in since 1696 so this trade is only for additional entries. Personally ill be looking out for impulse moves in both directions to have both buyers and sellers taken out before the actual move happens. Remember, the market could easily break and reject 1758 ( potential bullish stop hunt level is 1761 ) before dropping to preferred 1736-1738 and then only will it be safer to enter. SO BE PATIENT P.S stay out of consolidation. wait for impulses and re-tests before doing anything and remember, NO TRADE is also a position. Best of luck Yours truly NotBasic247
FX:XAUUSDLong
by Notbasic247