How Can I Differentiate a Double Bottom from a Double Top?

How to Identify and Trade Double Bottoms Pattern and Double Top Chart Pattern

A double tops chart pattern has an M shape and it occurs at a market top hence its name double top chart pattern and it signals a bearish stocks price reversal in the stock market. Once a double top chart pattern is confirmed then the stocks market will be considered to be bearish, therefore a double tops is bearish.

A double bottom trading pattern has a W shape and it occurs at a market bottom hence its name double bottom chart pattern and it signals a bullish stocks price reversal in the stock market. Once a double bottom chart pattern is confirmed then the stocks market will be considered to be bullish, therefore a double bottoms is bullish.

To identify double tops & double bottom patterns the example below explain the two stocks trading chart patterns:

Double Tops Chart Pattern

Double tops stocks pattern is a reversal chart pattern that forms after an extended upwards stock trend. As its name implies, this double top pattern formation is made up of two consecutive peaks which are roughly equal, with a moderate trough between.

This double tops chart pattern formation is considered complete once stocks price makes second peak & then penetrates lowest point between the highs, known as the neck line. The sell signal from this double tops chart pattern formation occurs when the stocks market breaks-out below neck line.

In Stocks, this double top chart pattern formation is used as a early warning signal that a bullish stock trend is about to reverse. However, double top chart pattern is only confirmed once the neckline is broken & the stocks market moves below the neckline. Neckline is just another name for last support level formed on the Stocks chart.

Summary:

• Double tops stocks trading pattern forms after an extended move upwards
• This double tops pattern formation indicates that there will be a reversal in the stocks market
• We sell when the price breaks out below neck-line: see below for explanation.

Double Tops Chart Pattern - How Can I Differentiate a Double Bottom from a Double Top?

Double Bottoms Pattern

Double bottoms stocks pattern is a reversal stocks pattern that forms after an extended downwards stock trend. Double bottoms stocks trading pattern is made up of two consecutive troughs that are roughly equal, with a moderate peak between.

This double bottoms chart pattern formation is considered complete once stocks price makes second low & then penetrates highest point between the lows, known as the neck line. The buy indication from this bottoming out signal occurs when the stocks market breaks-out the neckline to the upside.

In Stocks, this double bottom chart pattern formation is an early warning trading signal that the bearish stock trend is about to reverse. It is only considered complete/confirmed once the neckline is broken. In this double bottoms chart pattern formation the neckline is resistance level for stocks price. Once this resistance is broken the stocks market will move up.

Summary:

• Double bottom stocks chart pattern forms after an extended move downward
• This Double bottoms stocks pattern formation indicates that there will be a reversal in the stocks market
• We buy when price breaks out above the neck line: see below for the explanation.

Double Bottom Pattern - How Can I Differentiate a Double Bottoms from a Double Tops?