Double Top
Reversal
The pattern is made up of two consecutive peaks that are
roughly equal, with a moderate trough in-between.
Note that a Double Top Reversal on a bar or line chart is
completely different from a Double Top Breakout on a P&F chart. Namely,
Double Top Breakouts on P&F charts are bullish patterns that mark an upside
resistance breakout.
توصيات الفوركس
Although there can be variations, the classic Double Top
Reversal marks at least an intermediate-term, if not long-term, change in trend
from bullish to bearish. Many potential Double Top Reversals can form along the
way up, but until key support is broken, a reversal cannot be confirmed. For
clarification, we will look at the key points in the formation and then walk
through an example.
Prior Trend: With any reversal pattern, there must be an
existing trend to reverse. In the case of the Double Top Reversal, a
significant uptrend of several months should be in place.
First Peak: The first peak should mark the highest point of
the current trend. As such, the first peak is fairly normal and the uptrend is
not in jeopardy (or in question) at this time.
Trough: After the first peak, there is generally a decline
of 10-20%. Volume on the decline from the first peak is usually
inconsequential. The lows are sometimes rounded or drawn out a bit, which can
be a sign of tepid demand.
forex signal
Second Peak: The advance off the lows usually occurs with
low volume and meets resistance from the previous high. Resistance from the
previous high should be expected. Even after meeting resistance, only the
possibility of a Double Top Reversal exists. The pattern still needs to be
confirmed. The time period between peaks can vary from a few weeks to many
months, with the norm being 1-3 months. While exact peaks are preferable, there
is some leeway. Usually, a peak within 3% of the previous high is adequate.
توصيات الذهب
Decline from Peak: The subsequent decline from the second
peak should witness an expansion in volume and/or an accelerated descent,
perhaps marked with a gap or two. Such a decline shows that the forces of demand
are weaker than supply and a support test is imminent.
Support Break: Even after trading down to support, the
Double Top Reversal and trend reversal are still not complete. Breaking support
from the lowest point between the peaks completes the Double Top Reversal. This
too should occur with an increase in volume and/or an accelerated descent.
Support Turned Resistance: Broken support becomes potential
resistance and there is sometimes a test of this newfound resistance level with
a reaction rally. Such a test can offer a second chance to exit a position or
initiate a short.
Price Target: The distance from support break to peak can be
subtracted from the support break for a price target. This would infer that the
bigger the formation is, the larger the potential decline.
While the Double Top Reversal formation may seem
straightforward, technicians should take proper steps to avoid deceptive Double
Top Reversals. The peaks should be separated by about a month. If the peaks are
too close, they could just represent normal resistance rather than a lasting
change in the supply/demand picture. Ensure that the low between the peaks
declines at least 10%. Declines less than 10% may not be indicative of a
significant increase in selling pressure. After the decline, analyze the trough
for clues on the strength of demand. If the trough drags on a bit and has
trouble moving back up, demand could be drying up. When the security does
advance, look for a contraction in volume as a further indication of weakening
demand.
Perhaps the most important aspect of a Double Top Reversal
is to avoid jumping the gun. Wait for support to be broken in a convincing
manner, and usually with an expansion of volume. A price or time filter can be
applied to differentiate between valid and false support breaks. A price filter
might require a 3% support break before validation. A time filter might require
the support break to hold for 3 days before considering it valid. The trend is
in force until proven otherwise. This applies to the Double Top Reversal as
well. Until support is broken in a convincing manner, the trend remains up.