V-shaped inversion is a common and strong inversion form in actual combat, which often appears when the market fluctuates violently, and there is only a low point or a high point in the bottom or top area of the price. The following is the formation conditions of V-shaped inversion compiled by Bian Xiao, hoping to help everyone.
What are the forming conditions of V-shaped inversion?
Among all the inversion forms, V-shaped top or V-shaped bottom is the most difficult to distinguish. In most reversals, the existing trend shows obvious signs of slowing down, that is, the market has a period of horizontal extension.
However, in the V-shaped reversal, there is no turning point or transition stage in the market at all, and there is almost no warning before the reversal. The original trend of the market often turns unexpectedly and then moves sharply in the opposite direction. Just like a rubber band being stretched too long, it suddenly bounces back strongly; After this happens, the disadvantaged market participants will take corresponding actions as soon as possible, which will further aggravate the market fluctuation and objectively speed up the movement (the slope is getting steeper and steeper). In the end, the party occupying the active position runs out of strength, while the other party takes advantage of the lack of further driving force in the market to violently counterattack, and the transaction volume increases obviously, usually forming a key reversal day or an intra-island reversal.
1, formation conditions
A necessary condition for the formation of V-shaped reversal is that there must be a trend in advance, and it often happens after the market continues to move sharply, with little or no adjustment along the way, and there have been several gaps in advance. The market seems to have far exceeded the expectations of most normal people, and even the most experienced investors are beginning to get nervous because of the continuous rise. This reversal is often accompanied by focusing on major events, such as major changes in related industry information or company conditions.
2. Fill in and confirm the form
Since the premise is that there is a steep or out-of-control trend, the key reversal date or island reversal is usually an important sign, and accompanied by huge trading volume, the only effective signal is the breakthrough of the existing trend line, and the moving average is of little help because of its nature lagging behind the out-of-control price change. Generally speaking, as long as the breakthrough reaches the effective basic requirements, the shape can be confirmed immediately, and the volume has little influence on whether to confirm the withdrawal, but the requirements for reversing from the bottom or the top are very different, that is, the V-shaped top generally does not withdraw immediately, while the V-shaped bottom often withdraws in a short time, so the original trend line should be a significant resistance or support.
3, after the completion of the movement mode and its amplitude.
After this form is completed, the stock price rises sharply and falls sharply, and usually falls back to the important proportion of the original trend in a very short time (such as 1/3 or 1/2), because the previous trend lacks support or resistance, and many gaps also leave a price vacuum. Because there is no shape, there is no problem of measuring amplitude, and it can only be judged by other methods.
How to confirm the V-shaped reversal of stocks
(1) Descending stage: Usually, the left side of the V-shape descends steeply and lasts for a short time.
(2) turning point: the V-shaped bottom is very sharp. Generally speaking, it only takes three or two trading days to form this inflection point, and the transaction at this low point has risen significantly. Sometimes the turning point occurs in panic trading days.
(3) recovery stage: then the stock price recovered from the low point, and the trading volume increased accordingly.
The key point of V-shaped inversion is that the V-shaped trend must have obvious transactions at the turning point in order to form an inverted V-shape on the graph; The second is that when the stock price breaks through the top of the extended V-shaped wandering area, it is bound to be accompanied by an increase in trading volume. When it falls below the bottom of the extended V-shaped wandering area, there is no need to increase the volume.
The bottom of the "V" shape means that when the empty side continues to depress the stock price and the energy of the empty side is exhausted, many parties immediately launch a counterattack without giving the empty side a chance to breathe. With the cooperation of trading volume, the stock price is gradually pushed up, forming a "V"-shaped upward trend. The trend of "extended V" is the deformation of the trend of "V". During the formation of the V-shaped trend, there is variation in the rising (or falling) stage, and some stock prices appear in the horizontal development of the trading area, and then this wandering area is broken, and the whole pattern continues to be completed. The morphological characteristics of inverted V-shape and inverted extended V-shape are just opposite to the trend of V-shape. In the process of V-shaped trend formation, the rising (or falling) stage presents variation, some stock prices appear in the horizontal trading area, and then break through the wandering area to continue to complete the whole pattern. The extended V-shaped trend is in the rising or falling stage, and some of them are rampant. This is because some people have no confidence in the pattern during the formation of this trend. When this power is eliminated, the stock price will continue to complete the whole model. When there is an extended V-shaped wandering area, you can buy at the low point of the wandering area and wait for the completion of the whole model. The extended V-shaped trend has the same predictive power as the V-shaped trend, but the V-shaped trend must have obvious transactions at the turning point and form an inverted V-shaped shape on the chart. It should be noted that when the stock price breaks through the extended V-shaped wandering area, there must be a trading volume at the top, and when it falls below the reverse extended V-shaped wandering bottom, there is no need to increase the trading volume.
V-shaped inversion formation condition
A necessary condition for the formation of V-shaped reversal is that there must be a trend in advance, and it often happens after the market continues to move sharply, with little or no adjustment along the way, and there have been several gaps in advance. The market seems to have far exceeded the expectations of most normal people, and even the most experienced investors are beginning to get nervous because of the continuous rise. This reversal is often accompanied by major events such as major changes in relevant policies, industry information or company conditions.
Filling and confirmation of forms
Since the premise is that there is a steep or out-of-control trend, the key reversal date or island reversal is usually an important sign, and accompanied by huge trading volume, the only effective signal is the breakthrough of the existing trend line, and the moving average is of little help because of its nature lagging behind the out-of-control price change. Generally speaking, as long as the breakthrough reaches the effective basic requirements, the shape can be confirmed immediately, and the volume has little influence on whether to confirm the withdrawal, but the requirements for reversing from the bottom or the top are very different, that is, the V-shaped top generally does not withdraw immediately, while the V-shaped bottom often withdraws in a short time, so the original trend line should be a significant resistance or support.
After the completion of the movement mode and its amplitude.
After this form is completed, the stock price rises sharply and falls sharply, and usually falls back to the important proportion of the original trend in a very short time (such as 1/3 or 1/2), because the previous trend lacks support or resistance, and many gaps also leave a price vacuum. Because there is no shape, there is no problem of measuring amplitude, and it can only be judged by other methods.