Professional traders kill amateur traders in the stock market with double top and bottom patterns. Do not be another victim. In fact, after reading this article you will be able to get the revenge you deserve.
Every rally in the stock market reaches a point where enough bulls look at it and say"I've made a lot of money, and I might make even more money, but Id rather take my profits off the table. Charts top out when enough bulls take their profits, while the money from new bulls is not enough to replace what was taken out.
Bulls who just bought in are mad as they came in too late. They are trapped. Their position continues to pile on losses. Should they hold on or sell for a loss? Only when enough bulls decide the stock has overreacted on the downside will they come in and buy. The rally will resume to the upside as more bulls rush in to buy on weakness. As prices approach the level of their old top, you can expect sell orders to hit the market.
There are always bruised and beaten warriors who got trapped in the previous sell off and take a blood oath to get out if the market ever gives them another chance.
At a market bottom, bears start covering their short positions when a new low is formed. Once the rally from short covering ends and the stock continues to fall, the question becomes will the previous low hold. If bears (fear) are stronger than bulls (greed), prices will fall below the previous low and the downward move will keep on going. If bears are weaker than bulls, the downward move will stop near the previous low and create a double bottom bounce. Use your other favorite indicators to decide which of these events is more likely to happen.
When a stock climbs to old high, you need to ask yourself will the stock breakout above that high or turn down and form a bearish double top pattern. Your favorite technical indicators like the MACD, RSI, and volume will help you answer this question.
If the volume, RSI, and stochastics start falling as the stock approaches its previous high, then it is likely that a double top pattern will form.
Whenever a stock falls to its previous low, it is likely a double bottom will form if the volume and MACD start climbing. - 23309
Every rally in the stock market reaches a point where enough bulls look at it and say"I've made a lot of money, and I might make even more money, but Id rather take my profits off the table. Charts top out when enough bulls take their profits, while the money from new bulls is not enough to replace what was taken out.
Bulls who just bought in are mad as they came in too late. They are trapped. Their position continues to pile on losses. Should they hold on or sell for a loss? Only when enough bulls decide the stock has overreacted on the downside will they come in and buy. The rally will resume to the upside as more bulls rush in to buy on weakness. As prices approach the level of their old top, you can expect sell orders to hit the market.
There are always bruised and beaten warriors who got trapped in the previous sell off and take a blood oath to get out if the market ever gives them another chance.
At a market bottom, bears start covering their short positions when a new low is formed. Once the rally from short covering ends and the stock continues to fall, the question becomes will the previous low hold. If bears (fear) are stronger than bulls (greed), prices will fall below the previous low and the downward move will keep on going. If bears are weaker than bulls, the downward move will stop near the previous low and create a double bottom bounce. Use your other favorite indicators to decide which of these events is more likely to happen.
When a stock climbs to old high, you need to ask yourself will the stock breakout above that high or turn down and form a bearish double top pattern. Your favorite technical indicators like the MACD, RSI, and volume will help you answer this question.
If the volume, RSI, and stochastics start falling as the stock approaches its previous high, then it is likely that a double top pattern will form.
Whenever a stock falls to its previous low, it is likely a double bottom will form if the volume and MACD start climbing. - 23309
About the Author:
Written by Sean Phelps. I hope this article helps you make a lot of money. For many more cash pulling secrets go to the most popular stock trading blog on the web at stock market
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