Definition
A five-point reversal is a broadening chart pattern made up of five alternating turning points that together form an expanding shape. The price swings grow wider as the pattern develops, and the fifth point marks the spot where the prior trend is expected to reverse.
It belongs to the family of broadening formations. The defining trait is the count: three peaks and two valleys, or three valleys and two peaks, traced out with each swing reaching further than the last.
Why it matters
How it works
As the five points form, each new high or low overshoots the previous one, creating the broadening, megaphone-like outline. A trader counts the turns and watches the fifth point: if price reverses there instead of continuing to expand, the pattern may be complete, and the expected move runs counter to the trend that preceded it.
Because broadening formations whipsaw both sides, the five-point reversal is best used with a confirmation step and defined risk. The width of the formation can help estimate a target via the measure rule once the reversal is underway.