Education & Information
Buy Signals
Low Pole Reversal
The low pole reversal pattern begins with a long column of Os down, which is considered the low pole. A low pole is defined as a column of Os that drops more than three boxes below the previous column of Os. In the chart above, you will see that the second column of Os falls below the first column of Os by five boxes. The Os represent supply and eventually the selling will subside and demand will resurface causing the chart to reverse up in to a column of Xs. If the initial amount of demand is substantial, often times it indicates a low is in place for the stock. The initial demand is considered substantial if the column of Xs that follows the low pole retraces the low pole by more than 50%. To determine the 50% level one would add up the number of Os in the low pole column. In the chart above there are nine Os in the low pole. Therefore, the next column of Xs needs to retrace it by more than 50%, or by at least five Xs. That happens at $33 in the chart above. In order for the low pole to be used effectively it is preferred that the stock is on a buy signal on its relative strength chart (see relative strength charts). We have found that if the stock drops down toward the bullish support line during the low pole it is often times very profitable to buy on the reversal.