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Trading Strategy
Reversal vs Continuation: Reading the Turn
Price is pulling back. Is the trend just resting before it resumes, or is this the top? That single read separates good trend traders from stopped-out ones.
NoVo Options Trading · 2026
Every pullback poses the same question: continuation (a pause before the trend resumes) or reversal (the trend is over)? Get it right and you buy the dip; get it wrong and you catch a falling knife. Three things help you read it.
1. Structure
In an uptrend, higher highs and higher lows mean the trend is intact — a pullback that holds above the prior low is likely continuation. The first lower low is the structural warning that a reversal may be underway. Structure is the primary tell (intraday trend following).
2. Where it happens
A pullback that holds at a logical level — a rising moving average, VWAP, a prior breakout level — favors continuation (the pullback entry). A move that slices through those levels and keeps going favors reversal. The level that holds (or doesn't) is the tell.
Continuation holds the line and bounces. Reversal breaks it and keeps going. The line tells you which — if you wait for the close, not the wick.
3. Volume and confirmation
A reversal usually needs conviction — expanding volume on the counter-move. A low-volume drift against the trend is more often a pause. And never front-run the turn: wait for confirmation (a close through the level, a lower low) rather than guessing the exact top (breakout vs fakeout). Dealer gamma tilts the odds — negative-gamma regimes favor continuation and extension (positive vs negative gamma). See why chasing the turn loses.
More on this: Volume Climax: Reading the Spike That Ends a Move · Hidden RSI Divergence: Reading Trend Continuation · Exhaustion vs. Continuation Volume Spikes on SPY · The Three-Bar Reversal Pattern on SPY, Explained · What Is a Reversal (Arbitrage)?
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NoVo is a software tool for market analysis and for executing trades you initiate, not financial advice. This article is general education, not investment advice. Options trading involves substantial risk of loss, up to and including your entire capital. NoVo makes no guarantee of profit, win rate, or performance, and past results do not predict future outcomes. You are responsible for your own broker account, configuration, and trading decisions.