The reversal levels offer a systematic approach to investing and trading that is effective and easy to use. Because it is based on end of day data you can enter your orders before markets open and you don't need to sit in front of a trading monitor all day. This is not a get rich quick method, but you can use it to get rich slowly.
Reversal levels are not ordinary moving averages. They are calculated quite differently, using a proprietary algorithm. The levels are designed to keep us in trending moves longer without getting stopped out too frequently. In practice this method rarely misses out on big trending moves. The price we pay for that is in the small losses we take when a stock keeps chopping sideways.
A stock is considered bullish as long as it keeps closing above its reversal level. Conversely a stock is bearish as long as it keeps closing below its reversal level. The reversal levels are recalculated at the end of every day and week, and sent out to our subscribers well 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). Stock is above its reversal level and rallying.
* Pale Green: weak bullish with downward momentum (MoM). Stock remains above its reversal level, but is starting to pull
back. Consolidation or start of a correction.
* Red: bearish with downward momentum (MoM). Stock is below its reversal level and moving lower.
* Pink: weak bearish with upward momentum (MoM). Stock remains below its reversal level, but is trying to bounce back. Sideways range or start of a rebound.
What to expect in practice?
A standard buy signal occurs when mode changes from red (or pink) to green, and then the stock is held as long as the mode stays green (or pale green). That can be days, weeks, months... as long as the stock stays above its reversal level. So, the idea is not to buy any stock that shows in green mode in our tables. We need a crossing of the reversal level (on a closing basis) for a Buy (or Sell) signal to be triggered.
The advantage of this method is that it captures almost every big trending move in any stock or index. The reason is clear: a stock will usually not embark on a big up move without crossing above its reversal level (which triggers a Buy signal). The only way a big move might be missed is when a stock makes a jump overnight (for example on take-over news).
The second advantage of this method is that it will help us avoid most significant bear markets in a stock or index. The reason is the same: a stock will usually not have a big decline without crossing below its reversal level (which triggers a Sell signal). The only way we can get caught in a big drop is when a stock we own crashes overnight. Fortunately that doesn't happen very often.
By riding out the big moves while avoiding most big declines we are putting the odds in our favor, but this comes at a price.
Sometimes we will take a series of small losses when a stock is hovering sideways and not making any trending moves. Then the moves are too small and the method cannot lock in any profits. So, that's something to be ready for with this method of investing. Trading for fewer (but bigger) wins always requires a certain level of mental toughness and the patience to wait for those favorable periods when the trending moves come. We keep taking our chances and over time we are rewarded. Most of the gains for a year will often come in just two or three months.
This standard strategy generates approximately two losses for every win, but the average win is much bigger than the average loss. You can check out our weekly and daily tables to see what kind of profits and losses you can expect. This is as transparent as we can make it for our readers.
Shorter term trading.
Traders who prefer quicker action with a higher % of winning trades can use our speculative Buy signals (spBuy) and trade for the QuickTargets that are given in the tables. That gives smaller but more frequent winners and can give up to 70% winning trades if you follow our instructions. The speculative Buy signals can also be used to pick up stocks near major bottoms with the aim of holding them longer term. Our strategy articles provide instructions for this type of "bottom fishing".
Are reversal levels for me?
Generally speaking 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 give strategies for each type. Further details about strategies can be found here: 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. You can use them for longer term market orientation. Our daily blog post gives the reversal level signals for a small demo portfolio. Watching our calls and results over a period time is the best way to figure out what this method can do for you.
Note: If you are trading a very small account then it will not make sense to pay $200 per year for any kind of subscription. Then it is better to trade the free signals we post on this blog until you have a bigger account.
The daily reversal levels for more than 3000 stocks and etf are available by monthly subscription. Once a month we give out a free sample of the file that gets sent to our subscribers. They can be found at the bottom of this page.
If you have any questions or remarks, please post them in the comments section below.