Reversal Hunter
Catch the early turn at oversold extremes — the hardest, most rewarding trade
The stack
3 screeners stacked together
Why this stack works
Reversal trades have higher failure rates than continuation trades — but when they work, they offer the best reward-to-risk. The trick is to NOT enter on the divergence alone; wait for price confirmation (a bullish candle) AND a structural support level (pivot or Fibonacci). All three together is rare; that rarity is the edge.
Entry rules
- 1Wait for the bullish reversal candle (engulfing / hammer) to fully form and close.
- 2Confirm RSI divergence is intact on the daily chart.
- 3Confirm price is within 2% of S1 pivot or the 61.8% Fibonacci retracement level.
- 4Enter on the next candle's open or on a small pullback.
Stop-loss
Below the reversal candle's low (always — this is non-negotiable for reversal trades).
Target
First target: previous swing high. Second target: 50% Fibonacci retracement of the prior down-move.
When this fails
- Higher-timeframe trend is strongly bearish (don't try to catch a falling knife).
- Reversal candle has small body relative to recent bars (weak confirmation).
- Stock is in a sector that just had bad news — wait for sector to stabilise.
FAQs
Divergence is a leading-warning signal, not a trigger. Stocks can stay oversold and continue falling for weeks. Always wait for price confirmation (a bullish candle) AND a structural support level before entering.