Double Top Chart Pattern
What is a Double Top Chart Pattern? A double top is a reversal pattern that occurs at the peak of an upward trend and can mark the beginning of a downward trend.
How Do I Recognize a Double Top Chart Pattern?
A double top chart pattern occurs in four stages:
1. Price reaches a new high
2. The trend faces resistance and sells off to support.
3. The price begins to move back to resistance, but another sell off occurs, meeting support again.
4. The price falls below support, establishing a downward trend
What Does a Double Top Chart Pattern Mean?
A double top chart pattern can point to a tug of war between buyers and sellers. While buyers try to push the contract, sellers resist the upward trend. When once again the top of the pattern isn’t broken, The buyers begin to back off, leading the sellers to dominate and send the trend downward.
Watch volume in this scenario, as it is likely to increase once the contract is below support. This support level may now become a new resistance level in the new trend.
Note that a similar chart pattern is the Big M, which has all the principles of a Double Top, but with much steeper moves.
George Kissi
Simple Day Trading System
Candlesticks fit into the overall technical picture, but it should be known that candlestick chart patterns are just one part of a wide array of studies that fit into technical analysis. Technical analysis spans all chart analysis, and it is even applied to some fundamental analysis statistics.
Candlesticks are usually traded actively or passively, but few traders deny their influence, especially those that use technical analysis in favor of traditional investing. Some traders like to use candlesticks as the sole buying and selling signals, while others blend them in with a few other technical indicators to refine their trading. Day traders and swing traders are much more likely to use candlestick patterns than investors, but that is due largely because of the difference in investing ideologies.
The passive view
Passive candlestick traders are more familiar with and typically favor other methods of technical analysis than chart patterns. This group of investors is made up of those who prefer computer generated technical analysis to the 18th century style of candlestick trading. The passive candlestick trader is usually an active, professional trader with a more complex trading style than most. This group is made up of people who […]
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