BasicCharts.docVIP

Chart Patterns Below is a list of common chart patterns that can be useful in Technical Analysis. Please see the Introduction to Chart Patterns article for more details on how to use chart patterns when analysing a chart.  Double Top (Reversal)  Double Bottom (Reversal)  Head and Shoulders Top (Reversal)  Head and Shoulders Bottom (Reversal)  Falling Wedge (Reversal)  Rising Wedge (Reversal)  Rounding Bottom (Reversal)  Triple Top (Reversal)  Triple Bottom (Reversal)  Bump and Run Reversal (Reversal)  Flag, Pennant (Continuation)  Symmetrical Triangle (Continuation)  Ascending Triangle (Continuation)  Descending Triangle (Continuation)  Rectangle (Continuation)  Price Channel (Continuation)  Measured Move - Bullish (Continuation)  Measured Move - Bearish (Continuation)  Cup with Handle (Continuation) Double Top (Reversal) The double top is a major reversal pattern that forms after an extended uptrend. As its name implies, the pattern is made up of two consecutive peaks that are roughly equal, with a moderate trough in-between. Although there can be variations, the classic double top marks at least an intermediate change, if not long-term change, in trend from bullish to bearish. Many potential double tops can form along the way up, but until key support is broken, a reversal cannot be confirmed. To help clarify, we will look at the key points in the formation and then walk through an example. 1. Prior Trend: With any reversal pattern, there must be an existing trend to reverse. In the case of the double top, a significant uptrend of several months should be in place. 2. 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. 3. Trough: After the first peak, a decline takes place that typically ranges from 10 to 20%. Volume on the decline from the first peak is usually inconsequential. The lows are sometimes rounded