Stock Market Guru Reveals Secret Of How To Play Double Bottoms
Stop losing to professional traders in the stock market when double tops and double bottoms form. Keep reading to discover how you can make thousands of dollars when double tops and double bottoms form.
All stock market rallies reach a point where bulls say, ok, I've made enough, I'm going to sell and take profits. When this happens, charts will top out when not enough new bulls are coming in to offset their profit taking.
Traders who just bought the stock are pissed off because they came to late. They are trapped, sometimes even in a Bearish Island Reversal. Should they just stay in the stock and hope it comes back or sell for a loss? Well, the stock will keep dropping until enough bulls decide that the stock has over extended itself on the downside. So as more and more of these bulls step in, the stock begins to rise and the rally continues. Now when the stock finally rises back up to its previous high, you can expect sell orders to hit the market as those who were trapped exit their positions.
There are always those traders who were trapped in the previous reversal and now they have sworn to their gods to jump out if the market would just give them another chance by rising to its old high.
An exact opposite situation happens in the stock market at a bottom. A stock falls to a new low at which enough shorts start taking profits by covering their positions which causes the market to rally. Once that short covering rally stalls and the stock begins falling again, all eyeballs are on that previous low-will it hold? If fear is greater than greed, prices will break below that previous low which will mark a continuation of the downtrend. If greed is stronger than fear, the downtrend will stop near the old low forming a double bottom. Your other technical indicators will help you figure out which of the two possibilities is more likely to occur.
Any time you see a stock rise to its previous peak, the main question in your mind should be will it rise to a new high or form a double top and turn down. Technical indicators like volume, MACD, RSI, and stochastics can be a great help in answering this question.
If the volume, RSI, and stochastics start falling as the stock approaches its previous high, then it is likely that a double top pattern will form.
Whenever a stock falls to its previous low, it is likely a double bottom will form if the volume and MACD start climbing. - 23200
All stock market rallies reach a point where bulls say, ok, I've made enough, I'm going to sell and take profits. When this happens, charts will top out when not enough new bulls are coming in to offset their profit taking.
Traders who just bought the stock are pissed off because they came to late. They are trapped, sometimes even in a Bearish Island Reversal. Should they just stay in the stock and hope it comes back or sell for a loss? Well, the stock will keep dropping until enough bulls decide that the stock has over extended itself on the downside. So as more and more of these bulls step in, the stock begins to rise and the rally continues. Now when the stock finally rises back up to its previous high, you can expect sell orders to hit the market as those who were trapped exit their positions.
There are always those traders who were trapped in the previous reversal and now they have sworn to their gods to jump out if the market would just give them another chance by rising to its old high.
An exact opposite situation happens in the stock market at a bottom. A stock falls to a new low at which enough shorts start taking profits by covering their positions which causes the market to rally. Once that short covering rally stalls and the stock begins falling again, all eyeballs are on that previous low-will it hold? If fear is greater than greed, prices will break below that previous low which will mark a continuation of the downtrend. If greed is stronger than fear, the downtrend will stop near the old low forming a double bottom. Your other technical indicators will help you figure out which of the two possibilities is more likely to occur.
Any time you see a stock rise to its previous peak, the main question in your mind should be will it rise to a new high or form a double top and turn down. Technical indicators like volume, MACD, RSI, and stochastics can be a great help in answering this question.
If the volume, RSI, and stochastics start falling as the stock approaches its previous high, then it is likely that a double top pattern will form.
Whenever a stock falls to its previous low, it is likely a double bottom will form if the volume and MACD start climbing. - 23200
About the Author:
By Sean Phelps. I hope this lesson helps you make a lot of money. For many more cash pulling secrets go to the most popular stock trading blog on the Internet by going to stock market
posted by X - Men @ 2:46 AM
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