Reversal Days: Buying & Selling Climax



When it comes to technical analysis, at times we found ourself searching for something which really works. Something which can really turn it all around. I don't know how many of you have heard of this principle before but I can assure you this is something which is going to work almost all the time. Whenever, this pattern will occur on the charts, the next moves will be exactly the same as we are going to learn now. So, without wasting another second of your previous time. Let's move straight away to the concept.

Climax Principal is basically a important concept that helps us to spot trend reversal. This particular chart formation goes by different names top reversal day/ down reversal day/ buying climax/ selling climax etc. First of all let's understand what is reversal day.

Reversal day usually occurs either at the top or the bottom of the chart.A top reversal day can be defined as the setting up of a new high in a uptrend, followed by a lower close on the same day. In simple words, the price moves up during the day establishing a new high but at the end weakens and closes below the open price. A bottom reversal day occurs during a downtrend the price moves to a new low during the day and at the end recovers and closes above open price.

Wider the range and heavier the volume on reversal days greater would be the significance of trend reversal. The reversal days or buying/selling climax may not be the final high or low in a trend but they signal a possible reversal of trend. Let's have a look at the following chart showing bottom reversal or selling climax.



The main idea behind bottom reversals is that at during such lows the sell off starts getting absorbed by the buying pressure which gets reflected in the chart. Hence, the trend reverses upwards.


On the other hand top reversal or buying climax occurs in a uptrend as can be seen from the following chart the price moved to new high and yet closed lower than the opening price depicted by dark candle. This point is major signal of trend reversal.


Selling climax in PG:


Another point to put here is that buying and selling climax works only when we have a clear trend on the charts. In case of sideways trend its better not to draw any conclusions.

Few more examples:





To sum it up:

1) In a downtrend, the price should move downwards during the day, establishing a new low and then close above the open price.

2) In a uptrend, the price should move upwards establishing a new high and then close lower then the open price.

3) The price movement should be spread over a larger area means the high or low established during the day should be atleast 7-8% more than previous  high/ low on the charts followed by a close against the trend.

4) Higher the volumes on reversal days more significant will be the results of this principle


Happy Investing
Stock King



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24 comments

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SauriN PateL
AUTHOR
February 24, 2015 at 8:21 PM delete

pls for confidence say which chart say which trend..means vidhi ka up or down , nandan ka uptrend or down

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February 24, 2015 at 10:56 PM delete

hold both as of now..........

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Anonymous
AUTHOR
February 25, 2015 at 8:40 AM delete

Sir ur views abt harrison malyalm plz...........divident paying compny with good financials CMP 50. Regards...

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Anonymous
AUTHOR
February 25, 2015 at 3:12 PM delete

Hello abi bro

If i see downward reversal day of ybrant digital on 19.2.15. It made a low but close price (27.15) was not above the open price (33) on the same day. So there should not be reversal but stock is moving upward.
Please guide why it is so?

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rahul kapoor
AUTHOR
February 25, 2015 at 3:14 PM delete

Please share your views about hindustan tin works for short to medium term.

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February 25, 2015 at 10:37 PM delete

although fundamentals seems good but not good on charts for now wait for it to close above 57 new entry adviced after that only

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February 25, 2015 at 10:40 PM delete

bro this is not the only reason for trend reversal there are several other techniques we can use to spot trend reversal one was fan principle which we learnt few days back................... keep checking our latest posts to master all these techniques regards

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February 25, 2015 at 10:43 PM delete

hindustan tin works is a good stock for long term but as of now it appears to be in strong downtrend support levels of 64 already violated so avoid it for now

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February 26, 2015 at 8:42 AM delete

third point says that on the day of climax the price should make a new high and should rise or fall considerably and then close opposite to the trend as can be seen from the chart...............

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Anonymous
AUTHOR
February 26, 2015 at 10:16 AM delete

Abhi sir ur views abt kanoria chemicals and unique chemicals repectively.... Can i enter for long term???????? regards

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Anonymous
AUTHOR
February 26, 2015 at 10:43 AM delete

Abhi sair namaskar......... Sir ek scrip hai mayur leather. Debt free almost, 75% promotor holding, dividend paying since last 10 years, increasing eps yoy, trading below book value 30... kya kehate ho lapak lu ya wait kru??????? kuch sugest karo plz

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SauriN PateL
AUTHOR
February 26, 2015 at 11:57 AM delete

Can I buy vidhi and richa ind???

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February 26, 2015 at 6:38 PM delete

kanoria chemicals looks good to me bro both fundamentally and technically .................. u can surely add it for long term

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February 26, 2015 at 6:41 PM delete

no doubt bro mayur looks fundamentally strong but technically it has some short of abrupt movement you can buy it for long term once it closes above 28.5............regards

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February 26, 2015 at 6:42 PM delete

and u can use ur gmail ids while posting comments so that u can get notification when I reply in ur mails....................

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February 26, 2015 at 6:43 PM delete

avoid both as of now.........

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February 26, 2015 at 10:34 PM delete

sure u can.................. it showed selling climax pattern today

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Rahul Kapoor
AUTHOR
February 27, 2015 at 4:35 PM delete

hello abhi bro.

why did you avoid for fresh entry in vidhi and richa??
how much down side is possible in your views in polyplex.

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February 27, 2015 at 5:58 PM delete

polyplex has support at 180 and 173 levels now should bounce back from here.................. wait for now in vidhi and richa

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annu friend
AUTHOR
March 6, 2015 at 4:55 PM delete

Hi...
Good eve.
Great concept bro. Valuable learning...thanks
Regrds
Amit santwani

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YN
AUTHOR
October 24, 2016 at 6:34 PM delete

Hi Abhishek...In PG example above, the new low was formed but it was the same bearish candle isn't it? Then how did it qualify all the three criteria of Selling Climax? Please confirm.

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October 25, 2016 at 10:32 PM delete

Hi YN, in technical analysis there can't be any specific pattern in real life, thats the reason we have to twist and bend the concept a bit always. In PG example there was climax n succeeding day there was a huge sell off which might be due to weakness in overall mkt or some other reason. But the good thing was it got filled up the very next day and trend reversed.......... climax either in an uptrend or in downtrend always suggest a possible change in trend.

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