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Charting Pattern Double Top and Double Bottom

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Posted by : NIFM
28 April, 2013, 2:17 PM
Double Top Double Bottom Double Top appears on a chart in the shape of the letter "M" and are quite common. The double top pattern is found at the peaks of an upward trend and is a clear signal that the preceding upward trend is weakening and that buyers are losing interest. Upon comletion of this pattern, the trend is considered to be reversed and the security is expected to move lower. The first stage of this pattern is the creation of a new high during the upward trend, which after peaking faces resistance and sells off to a level of support. The nest stage of this pattern will see the price start to move back towards the level of resistance found in the previous run-up, which again sells off back to the support level. Volume confirmation: High volume on the left top than the right top volume tend to be downward as the pattern forms sharp increase in volume on the break below neckline. Trading signals: One should wait for the price to break below the key level of support or neckline before entering. Once the price breaks below neckline one can go for shorts with considering neckline as a stop loss, If you don't wait there is 65% chance that the price will coninue higher without confirming the double top. Double bottom is just opposite to double top. It appears on a chart in the shape of the letter "W". It is vice versa of double top, It can be found at the bottom of downward trend and is a clear signal of strengthness of the stock or commodity, Anywhere this pattern found it will be signal of buy.

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