The Quasimodo Reversal Pattern

Using reversal patterns is a great way to add confluence to your trades. Having confirmation for your intended trade direction by way of a price action pattern can help make sure you trade in the right direction. One of the best reversal patterns to use in trading is the quasimodo. When combined with supply and demand analysis it can be very powerful indeed.

Short reversal

When looking for a short reversal one of the things generally considered is when price starts to make lower highs (LH’s) and lower lows (LL’s). However the following pattern presents some very good opportunities to enter short trades earlier and with more confluence.

Price reaches an extreme point, in this case a high or supply. Price then rallies above that extreme point creating a higher high. Next price drops below the original extreme with a great force breaking lows. This shows that selling pressure is now in control.

This can also annotated as follows H – L – HH – LL

That is high – low – higher high – lower low.

There are two reasons why I adopt this approach.

  1. The typical series of LH’s and LL’s can take a while to form whereas the above combination enables me to spot the direction change sooner.
  2. I like a bit more confirmation than simply looking for LH’s and LL’s

This acts as better confirmation for me as it shows that selling pressure in now in control.

High – Price is moving up

Higher Low – Further proof that price is moving up

Higher High – Are we seeing an uptrend?

Lower Low – Price drops below the previous high and the previous low. Only big selling pressure could cause that.

Lower High – Price reversal confirmed before a period of consecutive lower highs and lower lows.

There will often be a supply level that forms after the HH and before the LL. This represents some great selling opportunities. I look to enter these trades after a return to the supply level after I have seen the LL.

I look for the above pattern at or near higher timeframe supply.

Quasimodo image 1

 

Long Reversal

The long reversal is similar to the short reversal but simply reversed as below:

When looking for a long reversal one of the things generally considered is when price starts to make higher highs (HH’s) and higher lows (HL’s). However the following pattern presents some very good opportunities to enter long trades earlier and with more confluence.

Price reaches an extreme point, in this case a low or demand. Price then drops below that extreme point creating a lower low. Next price rallies above the original extreme with a great force breaking highs. This shows that buying pressure is now in control.

This can also annotated as follows: L – H – LL – HH

That is low –  high – lower low – higher high.

There are two reasons why I adopt this approach.

  1. The typical series of HH’s and HL’s can take a while to form whereas the above combination enables me to spot the direction change sooner.
  2. I like a bit more confirmation than simply looking for HH’s and HL’s

This acts as better confirmation for me as it shows that buying pressure in now in control.

Low – Price is moving down

Lower High – Further proof that price is moving down

Lower Low – Are we seeing a down trend?

Higher High – Price rallies above the previous low and the previous lower high. Only big buying pressure could cause that.

Higher Low – Price reversal confirmed before a period of consecutive higher highs and higher lows.

There will often be a demand level that forms after the LL and before the HH. This represents some great buying opportunities. I will look to enter these trades when price returns to the demand level after I have seen the HH.

I look for the above pattern at or near higher timeframe demand.

long quasimodo image 2

Happy Trading

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9 Comments

  1. lamar on March 9, 2014 at 15:37

    hey Joe,
    couple things. First is just curiosity…why call this Quasimodo? Quasimodo if the name of the first Sunday after Easter. LOL

    Second i know its extra work and noone is paying you but is it possible to make the notes on the charts themselves?

    Lastly, i have subscribed to the trading view charts. If i mark up a chart and figure out how to send it to you can you critique it for me? Oh and can if follow you on the trading view sight?

  2. Joe Wright on March 11, 2014 at 13:53

    Hi Lamar. Good question. I first became of this over and under pattern on trading forum called Kreslik here: http://kreslik.com/forums/viewtopic.php?t=2505. I was the directed to a similar pattern where it was called a quasimodo here: http://www.nobrainertrades.com/2009/06/over-and-under-pattern.html. I don’t know its called a quasimodo though to be honest. Using QM is much simpler than saying over and under pattern though. The difference with the way that I use it is that I like to see an SD level within the pattern formation.

    Re notes on the charts, I try to make the charts as clean as possible so that everything can be seen. I find that if I annotate too much, the charts look messy. I might do a mixture of both clean and fully annotated charts.

    I’d be more than happy to look at charts you have. Send me an email or something with them. I don’t currently post analysis on TradingView but if I do in the future I’ll let you know.

    • Lamar on April 13, 2014 at 07:52

      Hi max, I’ll send you some charts in the near future. You have been so helpful. I appreciate you. I have been sending folks your way on trading view. I usually get email notification when you respond back but I didn’t this time. I was reviewing QM and just happened to notice your response. Thanks.

  3. naveen on December 10, 2014 at 15:15

    Hi Joe, I came to know about QM pattern but I couldn’t able to understand it properly. Then I studied in your article. Now I am clear about it.

    Thank you for the excellent article.

    • Joe Wright on December 11, 2014 at 22:52

      Hi Naveen, I’m glad you understand. I’m happy I could help. If you need anything else, please let me know.

  4. Amir on October 8, 2016 at 08:23

    Hello Joe, can we just put a pending order at the QM line?

    • Joe Wright on October 9, 2016 at 21:59

      Hi Amir

      That’s a preference thing and for me it depends on which time frame it is. For example if there is just a H1 QM level I would not enter from the QM line. If there is a 5m QM level away from a H1 supply, then I’d place a limit at the 5m QM level (if it’s within a 5m SD level too).

      It’s all about the bigger picture, which time frames you’re trading and which ones’ you are using for analysis.

  5. mark jackson on November 12, 2016 at 22:20

    Hello Joe I sent you e-mail I am not sure if you received. there are numerous time frames to look for QM so Is there best, quick filter, approach to find QM? Any indicator ?
    in article you were showing H4 and M15…so which time frame are you using , H1, M5 HTF…? top down approach or independently regardless of time frame to find and trade QM?
    Thank you

    • Joe Wright on November 19, 2016 at 18:16

      Hi Mark, I don’t recall receiving an email.

      I don’t use indicators to trade so that’s not an option for me. The thought behind showing QMs on different time frames was just to highlight that they appear on all time frames.

      I don’t specifically look for QM’s to take trades. They are just one type of confirmation so if they are present, it adds confluence to the trade. I typically will use them to trade away from higher time frame levels. For example a daily QM away from a weekly SD, or 5m QM away from a H1 level etc. I hope that helps.

      Joe

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