• Trend Exhaustion: A reversal forms when the trend loses momentum, showing potential to change direction.
• Support & Resistance Levels: Strong support in a downtrend or resistance in an uptrend can trigger a reversal.
• Technical Indicators: RSI, MACD, or Stochastic help detect overbought/oversold conditions hinting at reversals.
• Candlestick Patterns: Doji, Hammer, and Engulfing patterns visually signal potential turning points.
• Divergence: When price and indicator move opposite (e.g., lower lows in price, higher lows in RSI), reversal may follow.

• Identify the prevailing trend — reversals work best after strong, extended trends.
• Watch for signals such as indicator extremes or reversal candle formations.
• Wait for confirmation via breaks of S/R, divergence, or opposite candle sequences.
• Define entry and exit points using support/resistance and moving averages.
• Use strict risk management — place stop-losses just beyond failed reversal zones.

A stock in a multi-week uptrend shows RSI above 70 and a bearish engulfing candle near resistance while MACD diverges. The trader enters a short position with a stop above resistance, targeting profits as price declines.