Page 48 - NEW FOREX FULL COURSE

FOREX TRADING COURSE FOR BEGINNERS

Gaps also appear on longer-term charts such as weekly commodity charts, but gaps on monthly
charts are rare because they generally are constructed to avoid gaps caused by contract
changeover. Like those on the daily charts, gaps on weekly charts are also "made to be filled".
A downtrend may slide to a slow, gradual halt in the saucer bottom formation. Open interest and
volume follow the same pattern as prices in this formation, reflecting speculator disinterest in a
market with little action and little profit potential. Our example on the monthly cocoa chart took
three years to form. Saucer bottoms on daily charts may take at least four weeks to become
visible.

Although this bottom formation doesn't meet the requirements of other bottom formations, it's
just as significant in signaling a trend change. Usually, the longer it takes to form a saucer bottom,
the more violently prices will rise out of their lows.

KEY REVERSALS
One of the most easily recognizable technical signals in trend change is the key reversal. A key
reversal often has an unusually wide trading range. Its requirements are a day's range outside
the previous day's range with a close higher than the previous close for an upward turnaround
and a lower close for a downward turn.

Here again, this chart formation reflects market psychology. A key reversal is the climax of a
period of buying or selling fever. In extremely volatile markets, two or more key reversals may
occur. The key reversal on the silver chart defined the top of its rally and signaled a fall in prices.
To be a valid key reversal top, trading volume must be heavy and the daily trading range should
be wide. Prices first surge to new highs, but fall back and close lower for the day.

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