Option Investor

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One-Day Reversals

A chart pattern consisting only of one bar. Following a rally an issue may make a higher high, but may suffer a change in investor sentiment mid-day and end up closing with a net loss for the session. Of course, the reverse can occur following a downtrend, a lower low and a shift in sentiment resulting in a gain for the session. The theory behind the one-day reversal can be applied to longer time frames, i.e., one month reversals, for longer term trading.