Confirming signals for a Double Top formation

[rajeshMahinder]

Hi all,

What are the other signals that you look in to confirm a Double Top formation in the charts? I know that many people use the Bollinger Bands to verify that the second peak crosses the Band and the recession begins after that ? Are there any other signals like this, particularly the volume signals, that confirm the Double top formation ?

 

[nkruger]

Divergence is a good leading indicator to have alongside a price pattern.

Have a look here:

http://www.trade2win.com/boards/trading-faq/31964-divergence-patterns.html

 

[ceydababy]

Divergence is a good leading indicator to have alongside a price pattern.

Have a look here:

http://www.trade2win.com/boards/trading-faq/31964-divergence-patterns.html

Agree 100%. Very few double tops fail to pay out when divergance is showing. Check out the link Nick posted for some examples of divergence at work ! Really is great stuff

 

[dcraig1]

If you are talking about stocks, then the behavior of the broad market is critical. If the market as a whole looks over sold, then the double top quite possibly isn't and may be an impending breakout.

If the broad market looks over bought then the chances of a double top following through are much better.

The chart and whatever indicators are put on it do not tell the whole story. The strength or weakness of the stock in relation to the broad market is very important.

 

[avmood]

Yah divergence is good. I use stochastic divergence with price, and sometimes macd divergence.

 

[u.tony]

Divergences are good as quoted by every body here. But I will add my opinion by letting you know that the Double Top can be confirmed if any other indicator is showing an over-bought situation. That is a strong buying trend.
Whereas the other indicator is showing a downtrend, then the Double Top is a weak buying trend and will reverse shortly.