Stock Market Guru Reveals Secret Of How To Play Double Bottoms
Professional traders kill amateur traders in the stock market with double top and bottom patterns. Do not be another victim. In fact, after reading this article you will be able to get the revenge you deserve.
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 just bought in are mad as they came in too late. They are trapped. Their position continues to pile on losses. Should they hold on or sell for a loss? Only when enough bulls decide the stock has overreacted on the downside will they come in and buy. The rally will resume to the upside as more bulls rush in to buy on weakness. As prices approach the level of their old top, you can expect sell orders to hit the market.
There are always those traders who were trapped in the previous reversal and now they have sworn to their gods to jump out if the market would just give them another chance by rising to its old high.
A mirror image of this situation occurs in the stock market at market bottoms. The market falls to a new low at which enough bears start taking profits by covering shorts and the market rallies. Once that rally stalls out and prices start sinking again, all eyes are on the previous low-will it hold? If bears are stronger than bulls, prices will break below the first low, and the downtrend will continue. If bears are weaker than bulls, the decline will stop near the old low, creating a double bottom. Technical indicators help decipher which of the two is more likely to happen.
When a stock climbs to old high, you need to ask yourself will the stock breakout above that high or turn down and form a bearish double top pattern. Your favorite technical indicators like the MACD, RSI, and volume will help you answer this question.
If a stock climbs to its previous high, if the volume, MACD, and stochastics are dropping then a double top is likely to form.
A double bottom is most likely to form if the MACD and volume start rising when the stock hits its previous low. - 23167
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 just bought in are mad as they came in too late. They are trapped. Their position continues to pile on losses. Should they hold on or sell for a loss? Only when enough bulls decide the stock has overreacted on the downside will they come in and buy. The rally will resume to the upside as more bulls rush in to buy on weakness. As prices approach the level of their old top, you can expect sell orders to hit the market.
There are always those traders who were trapped in the previous reversal and now they have sworn to their gods to jump out if the market would just give them another chance by rising to its old high.
A mirror image of this situation occurs in the stock market at market bottoms. The market falls to a new low at which enough bears start taking profits by covering shorts and the market rallies. Once that rally stalls out and prices start sinking again, all eyes are on the previous low-will it hold? If bears are stronger than bulls, prices will break below the first low, and the downtrend will continue. If bears are weaker than bulls, the decline will stop near the old low, creating a double bottom. Technical indicators help decipher which of the two is more likely to happen.
When a stock climbs to old high, you need to ask yourself will the stock breakout above that high or turn down and form a bearish double top pattern. Your favorite technical indicators like the MACD, RSI, and volume will help you answer this question.
If a stock climbs to its previous high, if the volume, MACD, and stochastics are dropping then a double top is likely to form.
A double bottom is most likely to form if the MACD and volume start rising when the stock hits its previous low. - 23167
About the Author:
By Sean Phelps. I hope this article makes you a ton of money. For many more cash pulling secrets go to the most popular stock trading blog on the web at stock market
posted by X - Men @ 11:18 AM
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