Pattern – Part 2: Double / Triple TOP / BOTTOM, Rounding TOP / BOTTOM

With this article we continue with the family of inversion patterns.

DOUBLE TOP / BOTTOM

The double top / bottom is another inversion figure. Like the head and shoulders, it’s consequently formed by an excessive inclination of the uptrend / downtrend.

In case of double top :

  • Increase the excursion between the tops;
  • as we go up to the first top we have an increase in volumes, which decreases with the fall in prices;
  • the second top has an increase in volumes but lower;

The trend in volumes in this case must follow the price trend.

The figure is completed when the support line, generated by the minimum of the figure, breaks down.

Image1: example of double top on BTC – daily timeframe

The double bottom is a inverse figure, moreover as the bottom head and shoulders occurs at the end of a bearish trend.

It is formed as follows:

  • two large downward fluctuations and a trend in volumes that on average is increasing;
  • after the first price drop with low volumes there is a recovery with volumes that on average increase.
  • The second descent also has low volumes.

A possible target can be obtained the distance of the peak with respect to the maximum of resistance.
Another possible target is identified by the sum of the two peaks.

The figure is completed overcoming the resistance line traced making it pass for the maximum reaction (the maximum of the ascent between a bottom and the other).

NB: the two top / bottom have about the same height

TRIPLE TOP / BOTTOM

The triple top is also an inversion figure generated similarly to the double top.
The main difference is that it creates a third top / bottom that however has very low volumes.

ROUNDING TOP / BOTTOM

This is an inversion pattern that, compared to previously seen, is more gradual and therefore does not involve a marked change in the trend. Usually we have the termination of trends that last very long.

TOP rounding is formed as follows:

  • Start with high volumes
  • Half of the pattern has the absolute minimum of volumes
  • subsequent increase in volumes on the end of the pattern.

The BOTTOM rounding instead:

  • start with low volumes
  • at the absolute minimum there is a clear increase in volumes
  • next volume of the volumes at the end of the figure.

References:

  1. Ettore Coliva, Lucio Galati, “ANALISI TECNICA FINANZIARIA”, 1th edizione del 1992, UTET Libreria (Pag 18 – 19).
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