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What is a cyclical turning point?

January 4, 2013, 12:00 PM Przemysław Radomski , CFA

Please explain "cyclical turning point." I am new and do not understand this term. Thanks.

The idea of a cyclical turning point is based on the notion that gold, silver and other asset price trends tend to change at fixed intervals in time. In other words, gold and silver tend to change direction every X days. An important point here is that even if you know the number of days between reversals, you don’t know the direction in which the trend will change.

So, for instance, if you know that gold’s price path changes direction every 30 days, you can identify possible future dates when the price path will change but you don’t know if the change will be to the downside or to the upside.

But nevertheless, if the price of gold actually reverses every X days, you can extract some information from this. Namely, if the price of gold is declining right before the turning point, it is possible that it will rebound and a bottom will be formed. Conversely, if the price is rising just before the cyclical turning point, it is possible that the situation will turn around, gold will go down and a local top will be formed.

This is a basic explanation of a turning point. To see a more detailed explanation with turning points shown on a chart, please check our dictionary term turning points.

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