Harmonic Trading, Volume One: Profiting from the Natural Order of the Financial Markets

Chapter 10. Price Action in the Potential Reversal Zone (PRZ)

Ideal Reversals

An ideal reversal usually possesses several characteristics that clearly separate it from other types of price reactions. An ideal reversal usually tests all of the numbers in a Potential Reversal Zone on the initial test. The predominant trend usually reverses from this initial test of the entire PRZ and continues in the reversal direction shortly thereafter. In an ideal reversal, the price bar that tests all of the numbers in the PRZ is called the Terminal Price Bar (T-bar).

Ideal Bullish Reversal

In an ideal bullish reversal, the price action should reverse after the entire range is tested (see Figure 10.1). Although price action may seem strong as it declines ...