Commodities Flap copy The Encyclopedia of Chart Patterns, recognized as the premier reference on chart pattern analysis, extends its lead with this Second Edition. This definitive text includes new bull and bear market statistics, performance sorted by volume shape and trend, more than a dozen additional chart patterns, and a new section covering ten event patterns. He also shows you how to trade them and uses reliable statistics to back it all up. It goes where no one has gone before.
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The double top is one of the most popular patterns in trading. It consists of 2 tops at nearly the same level with a valley in between, which creates the neckline. The second top does not break the level of the first top, so the price retested this level and tried to make a higher high, but failed. Price breaking the neckline and closing below it would complete the pattern.
Conservative traders look for additional confirmation and aggressive traders may enter a bearish position from the second top. The target can be estimated by measuring the height of the pattern and projecting this downwards from the neckline. Common stop levels are just above the neckline, halfway between the neckline and the tops or above the tops. The poor showing of this formation further emphasizes that many double top patterns do not decline far and this formation may not be worth trading at all.
The question then becomes, is it worth taking profits on a confirmed double top? Those are good questions. If you sell when the double top is confirmed, you may be selling near the ultimate low. Triple Bottoms and Tops.
Bulkowski's Pattern Index
Download: Thomas Bulkowski Encyclopedia Of Chart Patterns.pdf