Outside Reversal: Chart Patterns for Smarter Australian Investing in 2025

Australian investors are always on the lookout for reliable signals that help predict market turning points. One pattern making a resurgence in 2025 is the outside reversal. This classic chart pattern, long favoured by technical analysts, is now being used by a broader set of market participants—from seasoned traders to property investors—eager to anticipate shifts in both shares and real estate prices.

What is an Outside Reversal?

An outside reversal is a price action pattern found on candlestick charts, where the day’s price range fully engulfs the previous day’s range—opening lower (in the case of a bullish reversal) and closing higher than the prior day’s high, or vice versa for a bearish reversal. It often marks exhaustion in the current trend and hints at a possible change in direction.

• Bullish outside reversal: Signals a possible bottom, with prices pushing lower before buyers take control and close above the previous day’s high.
• Bearish outside reversal: Suggests a potential top, with prices surging higher before sellers dominate and close below the prior low.

Outside reversals are most significant after extended trends, where sentiment is stretched and a sudden shift can catch traders off guard.

Why Are Outside Reversals Gaining Attention in 2025?

Several trends in 2025 have revived interest in outside reversals among Australian investors:

• Volatile markets: With the ASX and property markets reacting to RBA policy changes and global economic uncertainty, sharp reversals are more frequent.
• Algorithmic trading: More funds are using pattern recognition to identify potential turning points, making reversals self-fulfilling at times.
• Retail investor participation: The surge in retail trading platforms has brought technical analysis tools—and outside reversals—to a wider audience.

For example, after the RBA’s surprise rate pause in March 2025, the ASX 200 saw a series of outside reversal days as traders digested conflicting economic signals. Likewise, in Sydney’s property market, auction data has shown outside reversal patterns in weekly price charts, reflecting buyers suddenly stepping in after a string of declines.

How to Use Outside Reversals in Your Strategy

Spotting an outside reversal is just the first step—using it effectively requires discipline and context:

• Combine with volume: Higher trading volume on a reversal day adds credibility to the signal, showing conviction behind the move.
• Look for confirmation: Wait for follow-through in the next session before acting, as single-day reversals can be false starts.
• Pair with fundamentals: In 2025, outside reversals that coincide with major news (like RBA decisions or company earnings) tend to be more reliable.
• Set risk limits: Use stop-loss orders just beyond the reversal day’s range to protect against whipsaws.

For property investors tracking auction clearance rates or median prices, an outside reversal week (where the weekly range engulfs the prior week’s) can be a signal to reassess timing for buying or selling.

Real-World Example: ASX and Property Markets in 2025

Consider the ASX-listed travel company that, after months of decline, posted a bullish outside reversal on heavy volume following a positive earnings surprise. The move was confirmed the next day, triggering a rally as traders who had been short scrambled to cover positions. In property, Melbourne’s inner suburbs saw a bearish outside reversal week in April, with clearance rates plunging and median prices closing well below the prior week’s low—a warning sign for sellers.

Conclusion

Outside reversals are not a crystal ball, but in Australia’s fast-changing 2025 markets, they can offer early clues about shifting sentiment. Whether you’re trading shares, ETFs, or tracking property trends, learning to spot and interpret outside reversals could give you an edge when it matters most.