The “Stop Reversal” or “Goodbye Kiss” Pattern: A Guide to Trend Reversals in Trading

The "Stop Reversal" or "Goodbye Kiss" is a powerful price action pattern used in trading psychology and technical analysis to identify potential trend reversals. This pattern occurs when the price breaches a key support or resistance level, retests it, and then reverses direction. Below, we break down the setup, psychology, and key considerations for trading this pattern effectively.

Understanding the "Stop Reversal" or "Goodbye Kiss" Pattern

1. Initial Setup

  • The market is in a strong trend (upward or downward).
  • Price approaches a significant support or resistance level.
  • Traders watch to see if the level will hold or break.

2. The "Goodbye Kiss" Phase

  • Price breaks the support or resistance level, triggering stop orders.
  • It then retests the broken level, creating the "kiss."
  • This retest signals rejection of the level, often leading to a reversal.
  • The term "Goodbye Kiss" reflects the price "kissing" the level goodbye before reversing.

3. The Reversal

  • After the retest, price moves in the opposite direction, confirming the reversal.
  • This is a strong signal for traders to enter in the direction of the new trend.

Key Considerations for Trading the "Goodbye Kiss" Pattern

1. Volume Confirmation

  • A spike in volume during the retest strengthens the reversal signal.
  • Low volume may indicate a false breakout or weak reversal.

2. Momentum Analysis

  • Observe the speed and strength of the reversal.
  • A quick rejection of the level after the "kiss" is a strong confirmation.

3. Risk Management

  • Place stop-loss orders just beyond the "kiss" level to minimize risk.
  • Ensure proper position sizing to protect your capital.

Two Common Reversal Models: Model A and Model B

Model A: Ideal Reversal Setup

  • Price Action: Price reaches a key level (support/resistance) or market tension point.
  • Initial Correction: A sharp correction occurs, followed by a slower continuation toward the reversal level.
  • Reversal: Increased buying or selling pressure at the key level confirms the reversal.

Model B: Weaker Reversal Setup

  • Price Action: Similar to Model A, but with a weaker correction.
  • Retail Trader Activity: Larger candles and shallow corrections indicate retail-driven movements.
  • Reversal: Less reliable than Model A but can still signal a trend reversal.

Key Differences Between Model A and Model B

  • Sharp vs. Shallow Corrections: Model A offers clearer signals with sharp corrections, while Model B is less defined.
  • Retail Influence: Model B often involves retail traders, making it less ideal for reversal trades.

Trading the "Goodbye Kiss" Reversal: Best Practices

1. Identify the End of a Trend

  • Look for at least three distinct steps or corrections in the trend.
  • Exhaustion signals, such as weakening momentum, indicate a potential reversal.

2. Watch for Rejection and Return

  • A temporary breakout followed by a quick reversal is a strong signal.
  • This "continue to fail" scenario confirms the reversal.

3. Use Long Wick Candles as Indicators

  • Long wicks on candles signal weakness and potential reversals.
  • These are especially effective on lower timeframes.

Psychology Behind the "Goodbye Kiss" Pattern

1. Market Sentiment Shift

  • As the trend weakens, fewer traders hold positions in the original direction.
  • Increased selling or buying pressure confirms the reversal.

2. Retail Trader Behavior

  • Retail traders often drive weaker corrections (Model B), creating opportunities for reversals.
  • Institutional players may use these movements to fill their positions.

Risk Management in Reversal Trades

1. Entry Strategy

  • Enter trades on the first sign of weakness (e.g., a reversal candle with a long wick).
  • Avoid waiting for excessive confirmation, as it reduces profit potential.

2. Exit Strategy

  • Exit if the price fails to continue in the reversal direction after multiple attempts.
  • Switch to higher timeframes for clearer signals if uncertain.

Conclusion: Mastering the "Goodbye Kiss" Reversal

The "Goodbye Kiss" pattern is a reliable tool for identifying trend reversals. By understanding the setup, psychology, and key considerations, traders can improve their accuracy and profitability. Always combine this pattern with proper risk management and additional technical indicators for the best results.

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