I. What is V-shaped reversal pattern?

V-shaped reversal refers to a sharp market move downwards and followed by a sharp movement upwards with the increasing volume. Since the V reversal comes quite suddenly, hence it forms a “V” shape, and called V-shaped reversal.

Some V-shaped reversal patterns sees some slight fluctuations of price in the downward or upward trend as shown in the following chart:

II. How to identify V-shaped reversal?

1. It appears in a downward trend, with a very quick downtrend and steep angle.

2. The bottom is very sharp and reverses sharply in a very short time.

3. When it reverse, the volume will significantly increase compared to the downtrend. Volume increases in accordance with the rising prices in the upward trend.

4. Some V-shaped reversal pattern will see small adjustment in the downward and upward trend.

III. The technical meaning of the V-shaped reversal

The trading volume in V-shaped reversal pattern stopped falling and began to rally, is a buy signal.

V-shaped reversal generally occurs at the end of the downward trend or when meeting sudden bad news.

IV. Application of the V-shaped reversal pattern

V-shaped reversal pattern is a bottoming signal, now we look at the specific buy signal.

1. When the trading volume stops decline and rises, it indicates a buy signal. It also accompanied by K-line analysis, the close of solid positive line, and bullish engulfing pattern or other bullish signals.

V. V-shaped reversal pattern Exemplification

The above chart shows a 4-hour chart of the Gate.io futures. Between July 28 and July 30, BTC made two V-shaped reversal patterns. The first fell from $23,000 to a low of $19,000, and then quickly rebounded out of a wave of strong upward market, with the highest rally of $24,000. The rise was as high as 25% or more.

VI. Other situations

In actual trading, in addition to the V-shaped reversal patterns we will also encounter inverted V-shaped pattern as shown in the following chart. Since the two are different in application, traders should distinguish it carefully in real trading.

Summary

V-shaped reversal patterns are not often seen in actual trading, but often appear in very strong bullish secondary markets, where a wave of dips is followed by a rapid bottom-out, thus forming a V-shaped reversal pattern.

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Disclaimer

This is being provided for reference purposes only. The information provided by Gate.io above does not constitute investment advice and bears no responsibility for any investment you may make. The information regarding technical analysis, market judgments, trading tips, and trader sharing may involve potential risks, investment variables, and uncertainties, and this issue does not provide or imply any opportunity for guaranteed returns.