Analytics

The double top is not a bra size

Fear and Day Trading
Written by Noah Hochman

If after a period of strength, a stock is unable to penetrate the area of resistance which has been formed on top and backs away moderately from the high points only to return after a short time and again tries to go through the first resistance area but after several attempts is unable to do so, a double top has been
Double tops formed over a comparatively short time frequently give false signals. The top is really a resistance level. If the stock succeeds in going through on the second try at the top, the resistance level has been broken and the signal given by the double top is voided. Many chartists err in refusing to acknowledge when a stock breaks through. However, false breakouts are not uncommon so that great caution is necessary when that representation is seen. It can be a very tricky formation to act upon.

Remember, experience is the best teacher! Even better than me! You cannot expect to see any chart or analytical formation and with out a shadow of a doubt know where that stock is going. It is only after repeatedly seeing formations and movements that you can take technical analysis and combine it with other bits of information to make an informed decision. Although there is no place for guessing in trading, instinct goes a long way.

Noah Hochman

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Noah Hochman

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