Trendline Break

After commodities price has moved in a certain direction for an extended period of time within a channel it reaches a point where it stops moving within the channel. When this happens we say that the trend line has been broken.

Since the line is point of support or resistance then we expect the market to move toward the opposite direction. When this happens traders will close the orders that they had bought or sold. This is referred to as taking profit.

Up commodities trading trend Reversal

When commodities trading price breaks-out upward line (support) the market will then move down

This signal is considered to be complete with the creation of lower high or lower low. This also provides a trading opportunity to go short once it is broken.

Down commodities trading trend Reversal

When commodities trading price breaks-out downwards line (resistance) the market will then move up

Down-wards Channel break

This trading signal is considered to be complete with creation of a higher low or higher high. This also provides a trading opportunity to go long once it is broken.

NB: Sometimes when commodities trading price breaks its trend it might first of all consolidate before moving in the opposite market direction. Either way it is always good to take profit when the market direction reverses.

To trade this commodity setup as a trader once you open a new trade in direction of the trend reversal the commodities price should immediately move in that specific direction, in a trading price breakout manner. This means that the market should immediately move in that direction without much of a resistance.

If on the other hand the market does not immediately move in direction of the commodities trading price breakout then it is best to close out the trade because it means that the trend is still holding.

Another tip is to wait for the trend line to be broken & for the market to close above or below it so as to confirm this commodities trade signal.

What happens is that most traders open trades waiting for a reversal even before the trend is broken, only for the commodities trading price to touch this line and for the current market direction to hold and the commodity instrument to continue with the prevailing market direction.

Therefore, when trading this commodity setup it's best to wait until the breakout has been confirmed by trading price closing above or below the trendline, depending on the direction of the market.

• Upwards Market Direction Reversal - this signal is confirmed once the market closes below this upward line, this should be the correct time to open a sell short trade, so as to avoid a commodity whipsaw.

• Downwards Market Direction Reversal - this signal is confirmed once the market closes above the downwards line, this should be the correct time to open a buy long trade, so as to avoid a commodity whipsaw.

Combining With Double Tops or Double Bottoms Trading Setups

A good trade setup to combine this commodity setup with is the double tops and double bottoms patterns. Read Double Tops & Double Bottom Chart patterns Guide.

This setup should already have formed before the trend break signal. Because these double tops and double bottoms are also reversal signals, then combining these 2 setups will give the trader a good probability of avoiding a commodity whipsaw.

In the above chart screenshots these commodity setups can be confirmed to have formed even before the reversal signal appeared.

First Example of Upward Direction Reversal - the Double tops pattern had already formed before the trend break signal appeared on the commodities chart.

Second Example of Downwards Direction Reversal - the Double bottoms commodities chart pattern had already formed before the trend break signal appeared on the commodities chart.

Double Top or Double Bottom Combined With other Reversal Trading Signals