Tops and Bottoms

Head and Shoulders

Head and shoulders are top and bottom formations, that represent a winning and losing battle of tug of war between buyers and sellers. 

After a game of push and pull, one side breaks and the pattern is confirmed. A large move results that often kicks off a longer term trend.

Inverse Head and Shoulders

Inverse head and shoulders are the same as head and shoulders, just flipped upside down. The push and pull price action still develops a left and right shoulder, along with a low point or head.

When the resistance line is reached once again, a breakout follows. In this case, a throwback confirmed former resistance as support before the target was reached.

Double Top

When the price peaks out at two similar price levels, it is called a double top. Double tops are a common occurrence in trading. Assets may need several retests of support or resistance before a trend fizzles out. This results in two or more peaks.ű

Double Bottom

Double bottoms act the same way, requiring two strong pushes to support before a reversal takes place.

In the below example, a Adam and Eve double bottom is depicted. It differs from a traditional double bottom by having a second, rounded bottom instead of two sharp points such as the top example above.

Triple Tops and Bottoms

Much like a double top or bottom, a triple top or bottom features a third and final test of support or resistance before a reversal takes place.

By the third test of the support or resistance holding, it is a signal that it likely isn’t going to break and needs to gain momentum once again before another attempt is made.

Disclaimer: The article is provided for educational purposes only. It does not represent the opinions of NewsBTC on whether to buy, sell or hold any investments and naturally investing carries risks. You are advised to conduct your own research before making any investment decisions. Use information provided on this website entirely at your own risk.

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