How to Read Double Top and Double Bottom Pattern?

Note that price patterns can be applied to line chart, bar chart, or candle chart. Opposite of the double bottom is a Double Top chart pattern. Mphasis is a midcap IT counter with a market capitalization of INR 37,151 crores. The FY22 earnings per share is also the highest ever, at INR 76.31, all thanks to a 17.5% jump in net income to INR 1,430.88 crores. Bajaj Auto has witnessed a change in the polarity within its prices, which points towards the rising bullish sentiments around the level of Rs 3,400.

Once the highs and lows are identified, lower and upper lines can be drawn. The chart below shows a contracting triangle pattern acting as a continuation pattern. The trend prior to entering the pattern was up, and the breakout also occurred to the upside along with an increase in volume. Notice the diminution in volume when price was within the triangle and how volume picked up once price broke out of the triangle.

The first bottom should be the lowest trough reached during the current leg of the down move, while the second and the third bottoms should essentially be at the same level as the first bottom . Meanwhile, the rally from the low of the third bottom should be accompanied by higher volume as compared to that seen during the rally from the prior two bottoms. A triple top is a bearish reversal pattern that appears after a rally in price. While the double top pattern has two peaks and one intervening bottom, a triple top pattern has three peaks and two intervening bottoms.

Investor Risk Profile Questionnaire

Such a development enhances the likelihood of an upside breakout. Meanwhile, the breakout from the triangle must be accompanied by an increase in volume. If this happens, and if volume has picked up after the breakdown, then a move lower can be expected. A double top pattern is formed from two consecutive rounding tops.

It closed at Rs 366 on March 10, 2023, which translates into a downside of about 15%. It has surpassed the key moving averages of 100 & 200 EMA, which confirms the beginning of the trend to the upside. Please note that your stock broker has to return the credit balance lying with them, within three working days in case you have not done any transaction within last 30 calendar days.

Ascending triangle (Pattern type: Bullish Continuation)

Double top and bottom patterns are chart patterns that occur when the prices of the stock move in a pattern that is similar to the letter “W” or “M” . Flag pattern comprises a pole-like structure of candles and small consolidation of the price which appears like a flag on top of the pole. This pattern again represents a consolidation phase after a one-sided sharp momentum. Once the price breaks the upside of the flag, it can form another flag. Notice each peak is slightly below its predecessor, while each bottom is also slightly below its prior bottom.

Moreover, other market fundamentals should also support this signal. Traders should always use the chart patterns with other indicators such as volume for confirming the reversal before taking a position. The Double Top and Double Bottom chart patterns are usually formed after consecutive rounding tops and bottoms. Double top and bottom formations are highly effective when they are identified correctly on the charts. However, you may incur losses when they are interpreted incorrectly.

Improve Trading Psychology With Meditation

A rectangle represents a pause to the ongoing trend, during which the price broadly consolidates within a set range. The pattern comprises of at least two identical peaks and at least two identical troughs. The peaks can be connected using an upper trendline, while the troughs can be connected using a lower trendline.

These patterns have to be backed by sufficient volume and other indicators for further confirmation. Profit and Stocks is an exceptional team of market traders with over 12+ years of combined trading experience. Profitandstocks.com is a full-service trading education and mentoring company managed by Mr S. Kumar, passionately curious and independent trader in the financial markets since last one decade.

• Since the buying and selling are executed on the same day, there is no room for holding positions in intraday trading.
• Failure of price to make a new low during the formation of the right shoulder indicates that selling is receding.
• Because we have an additional peak and an additional intervening bottom , the peaks and troughs might not appear at identical levels.
• An ascending triangle represents a pause to the ongoing trend, during which the price broadly consolidates within a set range.

Our broad and global mission is to provide Training and Guidance to struggling https://1investing.in/rs and investors. This is a W-shaped pattern with two lows with a moderate incline between them. This is a bullish reversal pattern that usually signals the beginning of an uptrend. Once it reaches the neckline, it turns bullish and rises to form a second peak. The pattern is finally completed when the price moves to the neckline after the second peak.

When the double bottom stocksline of this wedge breaks, the price can again join the major downtrend. An ascending broadening pattern is a bearish reversal pattern that usually appears at the end of an uptrend. An ascending broadening pattern has two trendlines that are diverging. This pattern is characterized by higher highs and horizontal lows. An expanding broadening pattern has two trendlines that are diverging.

Whatever the form it takes, do not anticipate the direction of the break. Wait until the break happens before deciding to initiate a trade. Just keep in mind that contracting triangles are more likely to continue the prevailing trend rather than reverse it. A Head and Shoulder (H&S) top is one of the most commonly talked about price patterns in technical analysis.

If the subsequent decline drags the price to decisively break the lower line, it can be construed as a trend reversal. Similarly, in case of an expanding broadening bottom pattern, price may fail to reach the lower line on the third decline. This may be construed as a warning that the selling is ebbing. If the subsequent rally lifts the price to decisively break the upper line, it can be construed as a trend reversal. A double top is a bearish reversal pattern that appears after a rally in price.

Stock Radar: This civil construction company gave a breakout from a double bottom pattern; time to buy?

Since the broader trend of the index is up, traders should use this decline as a buying opportunity and anticipate the resumption of the uptrend soon. The double bottom chart pattern is crucial to identify correctly. However, if it is verified, the trade could bring in better profits.

The drawback with this technique is that you are pre-empting the pattern formation and the pattern may or may not complete or confirm. If you are a technical analyst or a trader, you should be aware of their formation because these are easy to trade and has the potential of earning you handsome returns on your trade. On the daily timeframe, CDSL prices have given a breakout from th… Filling this questionnaire accurately will help us understand your risk tolerance with finance as well as time horizon in investing.

The formation of this pattern is completed when the prices move back to the neckline after forming the second low. Double Top resembles M pattern and indicates bearish reversal whereas Double Bottom resembles W pattern and indicates a bullish reversal. From an indicator perspective, the daily RSI has made a bullish divergence along an impulsive structure near the oversold level of 30.

Notice the deceleration in volume during the first half of the pattern. Also notice the sharp pickup in volume as price rallied from the second trough. This indicates accumulation is taking place at lower levels and increases the probability of an upside breakout. Finally, notice that the breakout of the pattern was accompanied by an explosion in volume, significantly increasing the odds of a valid breakout.

A Double Bottom chart pattern is a bullish trend reversal chart pattern. The pattern is in the form of English alphabet ‘W‘, with one swing top and two swing bottoms, hence the name double bottom. In technical analysis, the double bottom chart pattern is a highly effective price reversal pattern and is very commonly used. In this pattern, the price makes two lows at or about the same level before it starts a bullish uptrend.

Notice the uptick in volume at the time of breakdown from the pattern, suggesting that selling pressure in starting to increase. The price objective was exceeded in this case, before a sharp reversal took place. The above chart shows a descending triangle pattern acting as a bearish continuation pattern. Notice how volume decreased steadily when price was within the triangle. Also notice the pickup in volume at the time of breakdown and an acceleration in volume as price headed lower post the breakdown. Some of the key differences between the two patterns are tabled below.