(This is the third in a series of articles on basic technical analysis originally published in Futures magazine.)

Some chart patterns that provide the best clues that a market will continue an existing trend are also the key to determining when a market is changing course. In fact, the best reversal signals often occur when the continuation patterns illustrated in the previous article fail.

Most of the well-known chart formations used by technical analysts require a number of price bars before a pattern can be identified. However, sometimes, only one or two bars can provide a clue to future price action.

Perhaps the best known or most mentioned of these one-bar patterns is the key reversal. A key reversal down is a price bar that has a high above the previous bar’s high and then reverses to close below the previous bar’s close. A key reversal up is a mirror image — a bar with a lower low that reverses and closes above the previous day’s close. Typically, a key reversal is interpreted as the market’s attempt to drive to a new high or low, failing to do so and then giving up in exhaustion as prices close lower (key reversal down) or higher (key reversal up).

Trying to discern some type of pattern on a price chart sometimes comes down not to what the price is doing but to what it is not doing. No-trade zones where the price bars seem to skip a beat form so-called “gaps” — places where no trades take place from one time period to the next.