What is a reversal?
A significant change in the direction of an asset's price. A reversal can be positive or negative, e.g. when an upward trend loses momentum and the price of an asset starts to move downwards. It's the opposite of a continuation, when an asset's price carries on moving in a certain direction.
Where have you heard about reversals?
You'll often see references to specific types of reversal in the financial press. For example, when an asset starts to climb in value following a downward trend, this is called a 'rally'. When an upward trend ends and a downward one begins, this is described as a 'correction'.
What you need to know about reversals...
When it comes to the stock market, reversals can occur on a number of occasions during the same day. The price of a company's stock may rise or fall suddenly, depending on economic events and any announcements it makes.
Market analysts keep a close eye on different stocks, in order to predict price reversals. They might opt to sell a particular company's stock if they believe it's about to experience a downward reversal. Or they might choose to buy it if they feel an upward reversal is on the cards.