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Outside Reversal Day also known as Outside Reversal Session is a two bar or two candle pattern that either appears on top of an uptrend or at the bottom of a downtrend. This pattern could be a significant reversal pattern. While the pattern applies to a daily chart you may also consider it for intraday or weekly or monthly charts as well. There are two main definitions for this pattern.

Definition 1: Higher High - Lower Low

At the peak of an uptrend a candle or bar makes a new high but then makes a low that is lower than the previous bar. In other words the high of the new session is higher and the low of the new session is lower than the previous session (see image).

This pattern could also appear at the bottom of a downtrend. In this case the new session makes a new low but its high is also higher than the previous session.

Definition 2: High/Close or Low/Close

At the peak of an uptrend the new candle or bar makes a new high but then closes lower than the close of the previous bar or candle (see image).

If this pattern appears in a downtrend then the new bar makes a new low but then closes above the previous close.

The outside reversal day pattern is to some extent similar to the Japanese Engulfing Pattern. The engulfing pattern considers the open and close of the sessions rather than high and low. There are also some other differences. For example in engulfing pattern the direction of the candles are different. If the first one is bearish then the second one is bullish or vice versa.

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