Taking the downward trend as an example, its reversal process generally follows the basic rules: decline—stop falling—rebound—reversal. As shown in Figure 1:
figure 1)
Falling, falling K-line: medium and large negative line, long upper shadow line, continuous negative line falling, gradually enlarged negative line.
During the decline, the K line of stop falling: the long lower shadow line, cross star, and falling Yin line decrease in range, which is also called early warning signal.
Falling, rebound K-line: long lower shadow line, medium and large Yang line, also known as reversal signal.
The reversal in the decline is mainly reflected in the structural reversal in the trend.
In the process of falling, it can also be summarized into four stages:
1. Falling stage
2. Stop falling stage
3. Rebound stage
4. Reversal stage
figure 2)
In Figure (2), we find that:
Falling stage: The medium and large negative lines are the main ones, indicating strong short momentum, but there will also be small stop-fall or rebound K-lines.
Stalling stage: There is a short-term non-new low, and there is also a K-line with a certain lower shadow line and a small Yang line that rebounds.
Rebound stage: mainly based on the stop-fall K-line and rebound K-line, and one or two falling K-lines will also be mixed.
Reversal stage: Focus on structural trend change, break through the downtrend line, make no new lows, raise the lows, and break through the previous highs.
In a downward trend, there is often a rebound stage directly after the decline stage, and the rebound stage will also directly evolve into a V-shaped reversal. We roughly understand the basic reversal process and it is OK, so there is no need to conceptualize it.
Next, let's talk about the identification and trading of the starting point K-line.
The so-called starting K line refers to the first K line in the opposite direction of the band or trend reversal. As shown in Figure 3:
image 3)
The characteristics of the K-line at the starting point: It is opposite to the original trend, and it is common in the stagflation (stagflation) stage and the rebound stage. The K-line shape is generally a K-line of a medium and large entity or a K-line with a certain long shadow.
Any band or any trend market starts from the starting K line, but not all starting K lines are the starting point of the band or trend market.
How to grasp a valuable starting point K line?
Then, we must combine the trading background of the starting point K-line: trend, position, structure, etc.
Let's look at this case again, as shown in Figure (4):
Figure 4)
As shown in Figure (4), K1, K2, K3, K5, K6, and K8 are falling K-lines, K4 and K7 are stop-falling K-lines, and K9 is rebounding K-lines during the downturn from K1 to trough A.
Among them, K4 and K9 can be identified as the starting K line, but because the price is still in a downward trend, K4 and K9 are only a signal of market rebound, and it is not easy to form a reversal of the downward trend structure, so their value is not very high .
Band AB breaks through the downtrend line, forming the first wave of bulls' upside, and then the price falls back to test the key support level of the previous trough A, without hitting a new low, which preliminarily establishes a bullish reversal structure for the second test.
At the key horizontal support level AC, a Zhongyang line K10 appears, which belongs to the rebound K line and is also the starting point K line of a band CD. It is also a reversal signal at a key point of the reversal structure, so it is judged that K10 is a The starting K line with higher value.
When the band CD goes up and tests the horizontal resistance level of the previous wave peak B, it enters a stage of trend structure reversal, and the value of the K line at the starting point of the reversal stage is relatively high. K11 Zhongyang line is a starting point K line with relatively high value. It is located in the reversal stage. It relies on the support level built by the small high level to break through the key resistance level upwards, and initially establishes the formation of an upward structural trend.
It can be seen that the starting point K-line with higher participation value is generally best located in the rebound stage and reversal stage of the market, especially the starting point K-line in the reversal stage.
The above is based on the single-cycle starting point K-line identification and trading logic. This set of analysis methods can be used in large-scale cycle conversion transactions, which can solve many of our confusing problems in large-scale cycle transactions.
Figure 5)
Figure (5) is a daily trend chart, structure ABC is a clear downward trend structure.
K1 is a stop-fall K-line in a falling structure.
K2 is the rebound K-line in the falling structure, and it is also the K-line of the starting point of the rebound. This K-line is not suitable for participating in long positions whether it is the daily line or intraday. In the intraday cycle, you can properly look for opportunities to do long rebounds.
K3 is a small mid-yang line that rebounds, and its amplitude is smaller than that of K2, indicating that the strength of the bulls is weakening. If you participate in the rebound and do more, you can properly participate in the closing line of K2, but it is not suitable for the closing line of K3.
K4 has a certain long shadow line and small Yang line. This is a stagflation signal, indicating that there is pressure on the top. It is not recommended to go long on the daily line or within the day. Can it be short? Because it is not the starting point K-line, shorting the daily line is relatively aggressive and not suitable, but you can consider switching to intraday tracking.
K5 and K4 belong to the stagflation K line, which are early warning signals of weak rebound. Regardless of whether the early warning signal is on the daily line or within the day, if you are long, you do not consider participating. If you are short, you can observe and track participation according to the intraday cycle.
K6 is a bardo line with a long shadow line, which is the K-line signal of the starting point of the downward structure ABC. The daily line is bearish, try to avoid shorting within the day, because it is the starting point K line, looking for shorting within the day is a more reasonable strategic transaction.
Both K7 and K8 are the continuation of K-line starting from K6, and the short momentum is relatively consumed. If you have already entered the market at K6, you can continue to hold short positions. Be cautious when opening new positions, because the best opening position is the starting K-line K6 , Of course, if you are long, it is not recommended to participate in whether it is the daily line or the intraday, because the daily line has not yet seen a stop-fall K-line or a rebound K-line.
Finally, summarize the application of several starting K lines:
1. The shape of the K-line at the starting point is generally the K-line of the inverted medium and large entity K-line and the long shadow line.
2. You can pay attention to the starting point K-line in the stagflation (stagflation) stage and rebound stage, and the starting point K-line in the reversal stage has the highest value and should be focused on.
3. It will be more stable to enter the market by choosing the starting point K line at the key point (support level and resistance level).
4. The starting K line following the structural trend will be more robust.
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