Double tops
Reversal stock chart patterns
Online stock trading tips
how to swing trade and how to find them on stock price chart
Double tops and triple tops are common stock chart patterns. They can be found on long term stock charts based on daily, weekly or monthly time frames. But they can represent also intra day trading pattern on stock price chart with one minute period or other period available in day trading platform like 5 minutes, 15 minutes and also hourly or 240 minutes period for stock market price chart.
These chart patterns are used in stock market strategy but also for an online currency trading strategy that can be performed on currency market (Forex) or using currency ETFs.This type of stock chart pattern is generally considered bearish as it confirms end of significant uptrend and consolidation period. The break of this stock chart pattern to the downside is also very good opportunity for short sell trade in swing stock trading market strategy. Similar breakdown on day trading platform chart represents also good opportunity how to day trade such stock using one of intra day trading systems.
How to perform analysis of stock market for double top chart patterns
Tops are one of the very well-known stock chart patterns. You can find them on a chart based on these conditions:
- price made two or more almost similar highs
- price
retraced
back
more then 80%
after each of high
These stock chart patterns are often known as reversal stock chart patterns. They signalize that last trend move is probably finished and stock is now in
trading range
or is changing direction of the trend totally. When I analyze stock charts using technical analysis I often like to use
retracement levels.
They help me to understand what other player on financial markets do. Are they selling into last uptrend move? Or do they only wait for pullback and expect another strong move up in current
uptrend
move ? 40% or 50% retracement level is very common in good trend moves. But when stock come back more in their pullback, then it is good to think more about possible change in the trend. And such change often offer very nice trading opportunity ! As you can see on chart examples below.
How to scan for these chart patterns
These bearish stock chart patterns can be found in different ways. The typical one is that stock market trader does his/her own stock price chart technical analysis and this pattern is available there.Another option is to look for these stock chart patterns using some automated stock trading software method. There is possible to use some good stock market charting software that could also perform scanning functions like
Amibroker.
Another option is to use very special stock scanning software that is used only for stock scanning. This type of feature is often available in
stock trading software
of best stock brokers or live stock market quotes providers. And third option expects to use best free stock chart site like
FinViz
that offers also stock screening function and you can setup
individual screener
that looks for specific stock chart pattern.
Trading rules
for these stock chart patterns
The most obvious trading rules say you have to wait for the breakdown of the horizontal support level of this stock chart pattern. Then, you can enter short trade and expect further weakness.The
stop-loss level
should be above the support level. You can see this strategy was really successful in this case of NYX
My swing stock trading tip how to sell stocks short
using these bearish stock chart patterns
You can also wait for the first
pullback
to its former support level, which acts now as a resistance level, and enter trade in this situation. As you can see, such a
stock trading strategy
was also possible for the NYX stock chart above.This is little bit less risky approach to trading chart patterns like these ones. It allows to wait for test of resistance level and set entry and stop loss level much better then in breakdown trade type. The one shortcoming of pullback strategy is that sometimes breakdown initiates strong decline without any significant pullback and so the whole down move in such stock could be missed.
Such scenario is presented by this stock price chart of CHRW after strong breakdown of support level. The breakdown occurred by big gap associated with strong volume levels. This stock market trade was possible to realize only using breakdown type of strategy.
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