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Double Top - Full ExplanationA Double Top is considered a bearish signal, indicating a possible reversal of the current uptrend to a new downtrend. Sometimes called an "M" formation because of the pattern it creates on the chart, the Double Top is one of the most frequently seen and common of the patterns. The Double Top is a reversal pattern of an upward trend in a financial instrument's price. The Double Top marks an uptrend in the process of becoming a downtrend. A Double Top consists of two well-defined, sharp peaks at approximately the same price level. The two tops are distinct and sharp. The pattern is complete when prices decline below the lowest low in the formation. The lowest low is called the "confirmation point". The slowing momentum may be evidenced through a lagging peak on an oscillator like RSI. Though not required, the market may break above the first peak, even if briefly. A slight and temporary break above the first peak is preferred as it may excite the bulls only to reverse and trend lower. The neckline is formed between the price low of the valley between the two peaks. A break below this neckline will confirm the double top pattern. The bearish confirmation is specified by a break in the key price support level (neckline) situated at the low point between the ‘tops’. Important Characteristics Following are important characteristics for a Double Top. Uptrend Preceding Double Top The Double Top is a reversal formation. It begins with prices in an uptrend. The trend upwards should be fairly long and healthy. Time between Tops Generally, the longer the time between the two tops, the more important the pattern is as a good reversal signal. Decline from First Top The deeper the trough between the two tops, the better the performance of the pattern. Volume Volume tends to be heaviest during the first peak and lighter on the second. It is common to see volume pick up again at the time of breakout. Pullback after Breakout A pullback after the breakout is usual for a Double Top. The higher the volume on the breakout, the higher the likelihood is for a pullback. Two Peaks at Different Levels Sometimes the two peaks comprising a Double Top are not at exactly the same price level. This does not necessarily render the pattern invalid. Some analysts point out that investors should be less concerned if the second peak does not hit the high of the first peak. Trading with Double Top: There are certain rules when trading with Double Top chart patterns. Firstly one should see the market phase whether it is up or down. As the double top is formed at the end of an uptrend, the prior trend should be an uptrend. Traders should spot if two rounding tops are forming and also note the size of the tops. Traders should only enter the short position when the price break out from the support level or the neckline. Example: From the below example of the 15 Min chart of NIFTY we can see how bearish reversal takes places after the formation of the double Stop Loss & Target : In the case of a Double Top chart pattern, the stop loss should be placed at the second top of the pattern and can be trailed at the pullback high as price moves lower but this will be a bit aggressive. The price target should be equal to the distance between the neckline and the tops. Hope you all learnt from this post. Share with the community if you liked it. Regards Omahto
NSE:NIFTYEducation
by Omahto
17
BANK NIFTY ANALYSIS FOR 01-07-2021Do not trade in between 35200 - 34755 . Buy Above 35200 for the Targets marked on Chart Sell below 34755 for the Targets marked on Chart Make entries only when the price action is suitable respecting to the trendline Take Entries when Market sustains above / below our levels Avoid entries , if there is a Huge Gap Up / Gap Down Take Entries as per Price Action ** Only for Educational Purposes ( As you all can see our daily Analysis , Bank Nifty is respecting all our analysis with treadlines and Support & Resistance Lines ) PLEASE DO LIKE , COMMENT OUR POSTS .
NSE:BANKNIFTY
by ULTRA-TRADER
Double Top Pattern on SBIDouble Top, a bearish reversal chart pattern explained What is Double Top Pattern ? NSE:SBIN Double top is a trend reversal chart pattern formed after good bullish price move (a continuous price move for a good duration) where the upward price movement looses its steam (first top) and it retraces a bit (to neck line or mid point). Then again it moves in direction of original trend and reaches the first top level there by forming second top. It again cannot move above first top and start moving to neckline. Once the neck line is broken its fall in price is steep. Understanding Double top in details Double top is formed when the stock moves up for many days and the movement is steep towards the end. And then it falls from there by about 10-15 %. After this it again tries to move up and reaches level of previous high but cannot cross its previous high. After this it again starts falling to a level of neckline. Once it retraces below neckline a downtrend starts. A image representing Double Top Chart Pattern formation Please note that in actual practice, the two top may not be exactly at same level. Generally, second top is a slightly lower level but 1-2 % higher then first level is also acceptable. A significant higher second top may be dealt with lot of suspicion as it may indicate continuation of uptrend. Volume in double Top has a lot of significance as it can help to confirm formation of the pattern. Volume during first top should generally be much higher than volume during second top formation and volume during midpoint formation should be much lower than volume during neckline break out. Please avoid aggressive positioning when volume is not supporting the move. For aggressive traders a strict stop loss is recommended. It is very fairly common to see a pullback near to neck line after formation of the pattern. It should generally be seen as a healthy thing as it gives better confirmation of neckline as resistance. In some case the pull back may happen few times. If this happens too many times then it may not be typical double top pattern. In case of pullback, it is recommended to keep a stop loss of about 3% above neck line.
NSE:SBINShort
by prajwalasp
1