The Key Reversals indicator is a technical indicator that shares a lot of similarities with the engulfing price action pattern and is made up of three bars. Two of the price bars are trend-following, while the third one is such that it absorbs the preceding (second) one.
The indicator adopts two unique configuration setups:
– Bullish Fundamental Reversal (comprised of two bearish bars and a bullish bar (the third bar). The close of the third bar must exceed the high of the previous (second) bar.)
– Bearish Fundamental Reversal (comprised of two bullish bars and a bearish bar (third one). The close of the third one must be lower than the low of the previous (second) bar.)