When seeking out a stock that could possibly reverse its direction, search for stocks that have just attained a new record high or low. Additionally, observe at least 5-10 five-minute candles that are all in the same direction.
If the Relative Strength Index (RSI) is either below 10 or above 90, these are signs that the stock is in extreme conditions. It is equivalent to a rubber band that is stretched to its limit; the more tightly it is pulled, the more potential it has for bouncing back. A common methodology is to buy the initial candle that appears to be reversing, with a stop either at either the high or low or 20 cents below that. To maximize your success rate, use trailing stops to remain in the successful trades for as long as possible.