How To Cash In On Double Tops and Bottoms In The Stock Market
Stop losing to professional traders in the stock market when double tops and double bottoms form. Keep reading to discover how you can make thousands of dollars when double tops and double bottoms form.
Every bull run in the stock market hits a level where longs start taking profits because the stock has run up too far too fast. When longs take profits, charts top out when the money from new longs is not enough to replace what was taken out.
Bulls who are still long are screaming mad, especially if they came in late. They feel trapped. Their profits are melting away and turning into losses. Should they hold or sell? If enough bulls decide the stock has overshot to the downside, theyll step in and buy. As the rally resumes, more bulls come in. Now prices approach the level of their old top, and thats where you can expect sell orders to hit the market.
Many battle scared traders who got caught in the previous decline take a blood oath to get out if the market gives them a second 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.
Whenever you see a stock climb to its previous high, the first question in your mind should be will the stock climb to a new high or form a double top and head back down. Technical indicators like the RSI, MACD, and volume are very helpful in answering this question.
When a stock rises to its previous peak, a double top is most likely to form when the volume, MACD, RSI, and stochastics are falling.
Whenever a stock falls to its previous low, it is likely a double bottom will form if the volume and MACD start climbing. - 23204
Every bull run in the stock market hits a level where longs start taking profits because the stock has run up too far too fast. When longs take profits, charts top out when the money from new longs is not enough to replace what was taken out.
Bulls who are still long are screaming mad, especially if they came in late. They feel trapped. Their profits are melting away and turning into losses. Should they hold or sell? If enough bulls decide the stock has overshot to the downside, theyll step in and buy. As the rally resumes, more bulls come in. Now prices approach the level of their old top, and thats where you can expect sell orders to hit the market.
Many battle scared traders who got caught in the previous decline take a blood oath to get out if the market gives them a second 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.
Whenever you see a stock climb to its previous high, the first question in your mind should be will the stock climb to a new high or form a double top and head back down. Technical indicators like the RSI, MACD, and volume are very helpful in answering this question.
When a stock rises to its previous peak, a double top is most likely to form when the volume, MACD, RSI, and stochastics are falling.
Whenever a stock falls to its previous low, it is likely a double bottom will form if the volume and MACD start climbing. - 23204
About the Author:
By Sean Phelps. I hope this lesson helps you make a lot of money. For many more money making tips go to the most popular stock trading blog on the web at stock market
posted by X - Men @ 2:46 AM
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