Continuation and Its Relationship to Reversal
Every trend reversal should be confirmed in two ways. First, you need confirmation of the actual reversal before taking action. Entering or exiting a trade without confirmation of the reversal is a mistake. This is the immediate form of confirmation, and it might relate to a swing trade or even a very short-term retracement. The second form of confirmation is found in what happens to price in the next phase.
Once the reversal has occurred, will it continue? Or, is it a false indicator? For you to proceed with confidence, the new direction has to also be confirmed. This will be found in price moves above resistance or below support, moves beyond an identified neckline (in head and shoulders patterns, ...
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