Sell signal from double top formation

A sell signal from a double top formation signals increasing pessimism among investors and the beginning of a falling trend.

A double top formation is a top formation which marks the end of a rising trend. The formation consists of two tops of about the same height. The sell signal is triggered when the price breaks down below the tops.

Sell signal from double top formation

At the first top, investors are optimists. The trend is rising and things are looking good for the company. As the second top is formed, the optimism wanes. Many are disappointed when the stock does not reach above the previous top and thereby possibly does not continue the rising trend. When the price breaks down below the bottom between the two tops, the support there is broken. Optimism has been replaced with pessimism and a falling trend has begun.

A stock that has triggered a sell signal from a double top formation is indicated to continue falling, for at least as long as the formation is high.

Details

False sell signals are triggered fairly often from double top formations. This is especially the case when it is a small formation, when the stock is still in a rising trend channel and when volume development is positive. At a sell signal from a double top formation the stock as a whole should be assessed, not solely the sell signal. Many investors have sold long term winners too soon following weak signals from double top formations. The following applies:

  • Big double top formations are stronger than small ones.
  • Sell signals with negative volume development are stronger than sell signals with positive volume development.
  • Sell signals with a clear break down from a rising trend, including break below the previous pivot bottom, are stronger than if the trend and pivot bottom have not been broken.
 


Investtech guarantees neither the entirety nor accuracy of the analyses. Any consequent exposure related to the advice / signals which emerge in the analyses is completely and entirely at the investors own expense and risk. Investtech is not responsible for any loss, either directly or indirectly, which arises as a result of the use of Investtechs analyses. Details of any arising conflicts of interest will always appear in the investment recommendations. Further information about Investtechs analyses can be found here disclaimer. The content provided by Investtech.com is NOT SEC or FSA regulated and is therefore not intended for US or UK consumers.


Investtech guarantees neither the entirety nor accuracy of the analyses. Any consequent exposure related to the advice / signals which emerge in the analyses is completely and entirely at the investors own expense and risk. Investtech is not responsible for any loss, either directly or indirectly, which arises as a result of the use of Investtechs analyses. Details of any arising conflicts of interest will always appear in the investment recommendations. Further information about Investtechs analyses can be found here disclaimer. The content provided by Investtech.com is NOT SEC or FSA regulated and is therefore not intended for US or UK consumers.

Titlex

OK
+

Cookie consent

We use cookies to give you a better user experience. If you continue to use the website, you accept this. For further details click here.

Our use of cookies

When you use our website, we store a cookie on your device. The cookie is used to recognize your device so that your settings work when you use our websites. The information that is stored is completely anonymised. Cookies are automatically deleted after a certain time.

Necessary cookies

Investtech uses cookies to ensure basic functions such as page navigation and language selection. Without such cookies, the website does not function as it should. You cannot therefore make a reservation against these. If you still want to disable such cookies you can do so in your browser settings. In the Cookies section add this website to the list of sites which are not allowed to save cookies on your device.

Cookies from Google

We use services from Google Analytics and Google AdWords. These register cookies on your device when you visit our website. Google registers your IP address in order to keep statistics on user activity on the website. The IP address is anonymised, so that we have no opportunity to link the activities to a specific person. We use these statistics to be able to offer more interesting content on the website and to constantly improve ourselves. Google AdWords collects data so that our advertising on other websites gives better results. We cannot trace the data of individuals.

Allow cookies from Google