The reversal levels are a systematic approach to investing and trading that is both effective and easy to use. This method is based on end-of-day data, so you can enter your orders before markets open and don't need to monitor your trades throughout day. This is not a get rich quick method, but it can help you to build your wealth over time.
Reversal levels are not simple moving averages. They are calculated using a proprietary algorithm and are designed to keep us in trending moves for longer periods without getting stopped out too often. In practice, this method rarely misses out on big trending moves, although it can result in losses during periods of choppy sideways trading with fewer trending moves.
A stock is acting bullish as long as it keeps closing above its reversal level, and bearish as long as it considently closes below its reversal level. So the reversal level is used on a "bullish above, bearish below" basis. The reversal levels are recalculated at the end of every day and week, and sent to subscribers before the market opens.
The color codes in the tables indicate the current weekly Trend (Tr) and daily Mode as follows:
* Green: bullish with upward momentum (MoM). The stock is above its reversal level and rising.
* Pale Green: weak bullish with downward momentum (MoM). The stock remains above its reversal level, but is starting to weaken. This can indicate consolidation or the start of a pull back.
* Red: bearish with downward momentum (MoM). The stock is below its reversal level and moving lower.
* Pink: weak bearish with upward momentum (MoM). The stock remains below its reversal level, but is attempting to recover. This can indicate a sideways range or the start of a rebound.
What can you expect in practice?
A standard buy signal occurs when mode changes from red (or pink) to green, and the stock is held as long as the mode stays green (or pale green). That can be for a few days, weeks, or even months, as long as the stock stays above its reversal level. The idea is not to buy any stock that shows in green mode in our tables. A buy (or sell) signal is only triggered when the stock crosses the reversal level (on a closing basis).
The advantage of this method is that it captures almost every major trending move in any stock or index. This is because a stock usually won't start a big upswing without crossing above its reversal level (which triggers a buy signal). The only way a big move might be missed is if a stock jumps overnight (such as in response to takeover news).
The second advantage of this method is that it helps us avoid most major bear markets in a stock or index. This is because a stock usually won't experience a significant decline without crossing below its reversal level (which triggers a sell signal). The only way we could be caught in a big drop is if a stock we own crashes overnight, which can't be ruled out but fortunately doesn't happen very often.
By riding out the big moves while avoiding most major declines, we are increasing our chances of success. However, this comes at a cost.
Sometimes we will experience a series of small losses when a stock is stagnant and not making any trending moves. In these cases, the moves are too small and the method can't lock in any profits. So, you should be prepared for this when using this method of investing. Trading for fewer (but larger) wins always requires a certain level of mental toughness and the patience to wait for favorable periods with trending moves. We keep taking our chances and over time, we are rewarded. Not rarely most of the gains for a year will come in just two or three months.
This standard strategy results in approximately two losses for every win, but the average win is much larger than the average loss. You can check out our weekly and daily tables to see the kind of profits and losses you can expect. We are as transparent as possible with our readers.
Traders who prefer faster action with a higher percentage of winning trades can use our speculative buy signals (spBuy) and trade for the QuickTargets given in the tables. This results in smaller but more frequent wins and can result in up to 70% winning trades if you follow our instructions. The speculative buy signals can also be used to purchase stocks near major bottoms with the goal of holding them for the long term. Our strategy articles provide instructions for this type of "bottom fishing".
Are reversal levels for me?
Generally, this service is for investors and traders who know which stocks they want to own or trade, but are looking for a practical way to improve the timing of their buying and selling. Reversal levels can be used by different types of investors, and we provide strategies for each type. You can find more details about these strategies at http://www.reversallevels.com/p/strategies.html.
We use a "convince yourself" approach instead of spending money on aggressive marketing. The weekly reversal levels are posted on this blog once a month and can be used for longer-term market orientation. Our daily blog post gives the reversal level signals for a small demo portfolio. The best way to see what this method can do for you is to watch our calls and results over a period of time.
Note: If you have a very small account, it may not make sense to pay $200 per year for a subscription. In this case, it's better to trade the free signals we post on this blog until you have a larger account.
Daily reversal levels for more than 3000 stocks and ETFs are available by monthly subscription. Once a month, we provide a free sample of the file that is sent to our subscribers. You can find it at the bottom of this page.
If you have any questions or comments, please post them in the comments section below.