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Double Tops and Bottoms

Double tops & bottoms are one of the most popular price patterns in technical analysis

  • They are reversal price patterns, which means they indicate when a trend may reverse.

  • The easiest way to identify a double top/bottom is by looking for a pattern on the chart the represents the letter M (double top) or W (double bottom)

  • They can be used on all time frames and all market assets.

The double top and bottom price pattern is one of the most popular reversal price patterns in technical analysis. It’s very popular among traders not only because it’s fairly simple but because it can be applied to all market segments and time intervals.

Double Top

The double top price pattern is also known as pattern “M” due to its shape. It’s made up of two tops where the second top should be the same high or higher than the previous high. A perfect “M” is where both tops are exactly on the same level - but these types of situations are not often found on the market, simply because the market does not form such a formation so rigidly. That is where the second scenario became more popular, which is known as "wash & rinse" Double Top/Bottom.

Double Bottom

The double bottom price pattern is also known as pattern “W “due to its shape. It is made up of two bottoms where the second bottom should not the same low or lower than the first.

This pattern is first formed when the market draws one bottom after which an increase movement is initiated, followed by the forming of a second bottom. The top that is found between the two bottoms forms a significant resistance level.

It is very rewarding if one is able to catch the reversal pattern.

Chart Pattern

Dow was on a bull run for continuous 3 days and had decided to take a rest (the resting point is where reversal pattern is often found).

Reversal Pattern

This is a Wash & Rinse Double Top Pattern (A shooting star was formed at the second top).

Reversal Pattern

At Sniper Club, we are all using Fibonacci for entries as well as exits. Same FIB-tool was used on Chart pattern. You can see from the chart below, we can continue to use the FIB levels as S/R Lines. Wonderful right :)

FIB SR Lines

Hope you can start to see Pattern and benefit from it.

Cheers from London

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