For a trend to change, three events must occur.
1. The trend line must be broken - prices must cross the trend line drawn on the chart.
2. Prices stop making higher highs in an uptrend, or lower lows in a downtrend.
3. Prices must go above a previous short term minor rally high in a downtrend, or below a previous short-term minor sell-off in an uptrend.
The 2B Rule
In an uptrend, if prices penetrate the previous high, fail to carry through, and then immediately drop below the previous high, then the trend is apt to reverse. The converse is true for downtrends.
