There are numerous aspects that make up the well-oiled machine that is the stock market. However, these aspects are formed by combinations of consistent and repeating patterns. One of these patterns is time. Though time can be used in a number of ways to gauge performance, this article is specific to pinpointed intraday reversal times.
The average trader isn’t aware of these intraday reversal patterns, nor do they focus on time frames or likely even bother to look at times throughout the day. Those who are not aware suffer a disadvantage to those who are. Some have been trading for years, and still have never realized these time through their own trading. Others have kept detailed notes and have noticed the patterns or researched to have their eyes opened. It is these traders that hold that advantage over those who haven’t.
Check Your Watch
Intraday reversal times are specific times throughout daily sessions that the market is much more likely to reverse price action or stall the most recent pattern. These reversals may not always be huge moves or even trend reversals, but a reversal in price action. Sometimes that reversal can trigger a massive move. Other times, the reversal is simply a return to retouch the trend line. These can happen regularly as a result of the way Wall Street functions, in addition to market maker activity.
An example of this is the close of the bond market at 3:00 p.m. (EST). As a result, the last hour of trading may take direction based on the bond close.
Another great example is within the first 5 minutes of the trading day. From 9:30 – 9:35 a.m. (EST), the general public’s market orders to buy or sell are being processed by market makers. Very commonly, some of the biggest swings can be found in price action during just the first 5 minutes. A high or low of the day may even be established within this time frame.
More examples? Sure. How bout the beginning and end of lunch time? Market makers take lunch breaks too, which often leaves junior-level guys in charge while they’re away. This effect is often referred to as “doldrums,” as on most days, breakouts will fail during the lunch doldrums. “I’m goin’ to lunch. Just keep her on autopilot. No funny business.”
For more on the specific “schedule” of the stock market, read The Intraday Schedule of the Stock Market.
All times are plotted on charts below. The list of specific times that should be observed are (all shown in EST):
|Notable Reversal Times||Major Reversal Times|
|9:30 - 9:35 a.m.||9:30 - 9:35 a.m.|
|9:50 - 10:10 a.m.||9:50 - 10:10 a.m.|
|10:25 - 10:35 a.m.||1:30 p.m.|
|11:15 a.m.||2:15 p.m.|
|12:00 p.m.||3:00 p.m.|
|12:45 p.m.||4:01 p.m.|
Seeing is Believing
I’ve plotted these times on 1 min 1 day charts below using several tickers. The yellow rings represent reversals in price action that fell on or within the specific time frames listed above. The bold white lines represent the major intraday reversal times, while the thin dotted white lines represent the additional notable intraday reversal times.
First, lets look at $SPY. We’ll use this to represent overall market action, as $SPY is an ETF that tracks the SPX500 index. Note that both the high and low of the day fell on one of these specific times.
Now let’s look at $CENX and $WTW. We’ll use these securities to represent individual stocks.
$CENX had a spike at the open, which reversed within the first 5 minutes. From there, had an early day run up to the 7.40s, but at 1:15 p.m. she cracks, and triggers a fade for the rest of the session reaching her low of the day directly at the 3:30 mark.
Here’s another example with $WTW. She establishes the running low the of the day within the first 3 minutes of trading (which isn’t broken until just before the close), then puts in the high of the day about 30 minutes later. Although no other reversals occur directly on the plotted times, you can see that after showing full range, the reversal within the 9:50 – 10:10 frame triggers a major move that fades for the rest of the session.
Bring up some of your favorite tickers or market on a 1 min 1 day chart and note the times above. Not every reversal time will produce major market moves, but note the points of reversal in price action on a stock’s price for a few days and you’ll be amazed how often big moves happen at or within a few bars of a reversal time.
Intraday Reversal Times Analysis
In his book, Swing and Day Trading: Evolution of a Trader, brilliant market mind Thomas Bulkowski conducted an analysis study on intraday reversal times. In his study, he gathered analysis that consisted of nearly 21 million price bars within 54 common stocks, which equated to approximately 205 years of daily price data.
Mr. Bulkowski found that 24% of reversals occur at 9:31 a.m., just 1 minute into the session. In his conclusion, he highlights 1 min marks after ever hour and half hour (i.e. 10:01 & 10:31) in addition to every 51 min after the hour (10:51) as key points of reversal.
Of his findings, nearly 75% of all reversals he tracked occurred on or within one of the specific times highlighted in this article… over the last the 205 years.
Bottom line, numbers have always been hard to argue with. It almost seems too good to be true, but I promise you it isn’t. These key points can be used in scenarios like a rising wedge or BARR nearing the top of the pattern. They can also be useful in scenarios like overbought/oversold RSI, MACD crossovers, or as further confirmation in tandem with patterns, indicators, trading strategy and additional entry/exit signals.
The next time you trade, take note of these times throughout the day. Many traders have made significant strides in their trading after learning this information, and have adopted these times into their strategy. I hope you find it useful. Share with others if you do.