Technical Analysis -- Episode 12: Double top pattern
The double top pattern, also known as the "M" pattern, is a common technical formation characterized by two relatively close peaks with a connecting low point, forming a shape resembling the letter "M."
The double top pattern suggests a potential price reversal and a downtrend.
Key characteristics of the Double Top Pattern include:
Two similar peaks: It consists of two peaks that are similar or close in height.
Connecting low point: There is a low point that connects the two peaks.
Occurs in an uptrend: The Double Top Pattern typically appears during an uptrend, indicating a potential slowing of the upward momentum.
Breaks through support line: When the price breaks below the support line connecting the two "M" formations, the Double Top Pattern is confirmed, suggesting a possible downtrend.
Changes in trading volume: Usually, the trading volume is lower at the second peak, indicating increased selling pressure.
As the Double Top Pattern suggests a possible price reversal and downtrend, it can be used to identify potential turning points and make corresponding trading decisions.
However, it is essential to note that relying solely on the Double Top Pattern may not be sufficient to make reliable trading decisions; it should be combined with other technical indicators and trends for comprehensive analysis.
Here's an example to help you better understand the Double Top Pattern:
Netflix Inc. (NFLX): A clear Double Top Pattern was observed between October and December 2021. When the price broke below the support line, the Double Top Pattern was confirmed, and the stock price started to decline.
Source：Tiger trade app
When observing the Double Top Pattern, pay attention to the following points:
Confirm the peaks: Look for two peaks that are close or equal in height, as this is a key characteristic of the Double Top Pattern.
Observe the low point: Pay attention to the low point connecting the two peaks, usually forming a horizontal or slightly inclined support line.
Break of support line: Watch for a price break below the support line, which could be a sell signal, indicating the potential for further downward movement.
Trading volume: Observe the changes in trading volume, as lower volume during the second peak suggests reduced market interest.
Confirm trend reversal: In addition to the formation of the Double Top Pattern, investors should also watch for other confirming signals of a trend reversal, such as a break of a downtrend line or changes in other technical indicators.
In summary, when using the Double Top Pattern as a trading reference, it is essential not to rely solely on this pattern but to combine it with other technical indicators and trends for comprehensive analysis. Additionally, timely stop-loss and proper risk management are crucial aspects to consider.
【Reply to Win Rewards】
Tigers who select the right chart pattern of Double top pattern from the following three figures will receive 5 Tiger Coins. (Please comment on the stock or the photo directly)
Figure 1
Figure 2
Figure 3
Tigers who share stocks of chart out of the following options will be rewarded with 10 Tiger Coins.
【Event Duration】
10 October 2023 — 17 October 2023
In the next issue, we'll introduce another useful technical pattern, Double bottom pattern, which will make your stock trading easier and simpler after you learn it!
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Figure 1 shows the correct example of Double Top pattern.
Tried and found the similar pattern in $Occidental(OXY)$.
Come and join guys @koolgal @rL @Universe宇宙 @icycrystal @b1uesky @Aqa @GoodLife99
Am I correct for attach stock that firm the double top pattern? [smile]
Tigers, come join & share a stock that form double top!
Found a similar pattern in Wal-Mart $Wal-Mart(WMT)$ I attached here.
另外自己找到例子
"Double Top" pattern was formed between January~March 2023
🌟🌟🌟I found a Double Top Pattern in $Tesla Motors(TSLA)$
There are 2 peaks close together with a low point signifying a reverse towards a downward trend.
Thanks @Tiger_Academy for your important lesson in Technical Analysis today.
Thank you so much Tiger_Academy for explaining the key characteristics of the stock chart pattern - Double Top Pattern which is one of the stock analysis which investors could use to study the stock before making any trading decision.
Stock chart patterns are lines and shapes drawn onto price charts to help predict forthcoming price actions, such as breakouts and reversals. They are a fundamental technical analysis technique that helps traders use past price actions as a guide for potential future market movements.
Double tops are one of the important technical analysis patterns used by traders.
Double top is a chart pattern that occur when the underlying investment moves in a similar pattern to the letter "M" (double top) which means the stock price has hit a top twice before continuing the downward trend which indicates a bearish price movement.
Trading double tops can be a great way for traders to potentially earn large profits, but it is important to understand the risks involved when pursuing this strategy. Double top formation is highly effective when identified correctly. However, they can be extremely detrimental when they are interpreted incorrectly. Therefore, we must be extremely careful and patient before jumping to conclusions.
Out of the 3 figures shown in the article, Figure 1 is the correct chart pattern of Double Top pattern as shown below.