The Ultimate Reversal Setup Guide

Reversal days can unfold quickly and stir emotions. Price gaps higher, momentum accelerates, and continuation can feel like the only path forward. But Andre Arslanian, CEO of Edgeful, takes a different approach. Rather than relying on opinions, he focuses on historical data to understand how and when a market has shifted.

The ultimate reversal setup combines three objective reference points on the E-mini S&P 500 (ES): the prior session high or low, the midnight open, and the prior session close. When price opens beyond these levels in the same direction, the data can support a retracement bias rather than automatic continuation.

 

Start with the right session levels

 

Before applying the setup, define your “previous day” correctly. In this framework, the prior day refers to the New York session (9:30 am – 4:00 pm ET). That means:

• The prior high and low come from that session only.
• The prior close is the 4:00 pm ET close.
• The midnight open is based on 12:00 am ET.

Consistency matters. Changing sessions can shift your levels and alter your conclusions.

 

Level 1: The outside day reference

 

An outside day, in this context, occurs when the session opens above the previous session high (bullish outside day) or below the previous low (bearish outside day).

The key question becomes: After opening beyond that high or low, how often does price move within the same session?

In Andre’s six-month ES example, a large percentage of bullish outside days retraced to tag the prior high before the session ended. That doesn’t mean price collapses or fully reverses the trend, but it means the market revisits that breakout level.

Instead of assuming continuation, traders can use the prior high or low as a defined target zone.

 

Level 2: The midnight open

 

The second layer measures how often price revisits the midnight open (12:00 am ET) after the session begins.

If the session opens above the midnight open, the report tracks how often price retraces down to touch it. In the data Andre reviewed, that retracement occurred often.

Because the midnight open is closer to the current price than other references, it serves as a logical first target when a reversal bias is in play.

Again, this is not a prediction, but an observation to help shape expectations.

 

Level 3: The gap fill

 

A gap up occurs when the market opens above the prior session close. A gap down occurs when it opens below.

The gap-fill concept asks: After opening away from the previous close, how often does price return to touch it?

In the six-month ES snapshot Andre shared, gap fills occurred enough to treat the prior close as another objective level. When price opens above all three references–the former high, the midnight open, and the prior close–you have stacked conditions that favor retracement over continuation.

 

Weekday behavior changes the context

 

One of the most important filters is the day of the week.

Andre shows that Mondays can behave differently from Thursdays or Fridays. In his data, some reversal tendencies were weaker early in the week and stronger later. He also highlights that average volume and range expand as the week progresses, with higher participation on Thursday and Friday compared to Monday.

That matters. Lower volume sessions may support quicker profit-taking, while higher volume days can support extended moves or deeper retracements.

The takeaway: Don’t treat six-month averages as uniform. Break them down by weekday and adjust accordingly.

 

Timing matters, too

 

Another layer to consider is the time of day, as many gap fills occur earlier in the session. If price hasn’t retraced by late morning ET, the odds of a clean fill can diminish.

That insight can help with trade management. You might tighten risk, reduce size, or reassess your bias as the session continues.

 

Conclusion: Structure over impulse

 

The ultimate reversal setup is not about fading every strong open. It’s about defining three objective levels and asking a data-backed question: When price opens beyond these references, what happens next?

By anchoring targets to prior highs, midnight opens, and prior closes, and filtering by day and timing, you can build a structured plan around historical behavior. Pair that structure with risk management, and you have a framework designed to support consistent decision-making in fast-moving markets.

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