Education & Information
Buy Signals
Double Top
The double top is the most basic buy signal. In fact, all other buy signals are an extension from the double top. It is also the most common buy signal. Typically, this pattern occurs while a positive trend is already in progress. The double top means that demand continues to be stronger than supply and the up trend is proceeding nicely. It rarely will occur at a turning point from supply being in control and the trend changing to demand being in control. Usually, changes in trend take time to develop and simple double tops are not strong enough to suggest a major turning point in a stock. Because it is not a strong buy signal, one should not take large positions in a stock that breaks a double top solely because this pattern is broken. Other patterns that take longer to develop are better to look for prior to taking large positions. However, the double top is nice to see after you have taken a position as it suggests the trend you are looking for is in progress.