WaveTrack International

Elliott Wave Financial Price Forecasting

Reversal-Signature and Price-Rejection – The Golden Rule

by WaveTrack International| May 5, 2017 | 2 Comments

Many of our clients asked us over the years how WaveTrack defines a ‘reversal-signature’? And, when do we know that a ‘price-rejection’ takes place? As this is indeed a crucial factor in understanding the ‘golden rule’ of Elliott Wave trading we wrote this short excerpt to give you a quick insight on this important topic.

In short, a ‘reversal-signature’ follows the initial ‘price-rejection’ from a pre-determined fib-price-ratio measurement target level.

Reversal-Signature Measurements

The reversal-signature commonly consists of a 12-15% swing in the opposite direction as measured from the beginning of the preceding pattern. For example (see fig #1) the decline for the S&P began from 1370.58 with downside projection to 1074.82…total 295 points…

S&P 500 - Reversal-Signature

S&P 500 – Reversal-Signature

The price-rejection occurred at 1074.77 (see fig #2). This takes a 15% value of 295 points (44 points plus 1074 = 1118.00). As a result, an attempt to this level would be indicative of a reversal-signature.

Furthermore, this would be corroborated if a preceding high would be broken, and/or the upswing develops into a five wave sequence. However, the 12-15% levels are a guideline only though but they can be accompanied with more conventional reversal patterns such as – key reversal, closing reversal, island reversal plus more from the candlestick charts such as ‘bullish-engulfing’, bullish-hammer’, ‘morning star’ etc.

S&P 500 - Price-Rejection

S&P 500 – Price-Rejection

But the ‘golden rule’ is to await price-rejection then a reversal-signature before taking a position in the opposite direction. If you are neutral heading into a transition/reversal point, ensure you see some form of price rejection at or close to the pre-determined price area. This increases the probability that the pattern identified is correct. So that as a result your trading position can be adequately protected beyond the price extremity that ended the pattern.

Here are more examples on the topic of ‘Reversal-Signatures’ and ‘Price-Rejections’ (see links):

Flash Crash (see fig #4)
Gold-Silver News Alert

Learn more how to determine Fibonacci-Price-Ratios to prepare for ‘Reversal-Signatures’!

Watch WaveTrack’s Fib-Price-Ratio videos on youtube to see how these measurements can be applied. These videos are gems of know-how for those who have eyes to see! WaveTrack’s first Elliott Wave Academy video

Keep tuned for more updates!

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About WTI

WaveTrack International is a financial price forecasting company dedicated to the Elliott Wave principle and work of the R.N. Elliott. Clients include Investment Banks, Pension Funds, Total/Absolute-Return/Hedge Funds, Sovereign Wealth Funds, Corporate and Market-Making/Trading institutions and informed individuals -- & just about anyone who is affected by directional price change.

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