The double peak (a model of turn)

The double peak is a major turning model, which is formed after a long ascending trend. As its name implies, the model consists of two consecutive peaks that are approximately equal to each other with a moderate depression among them.

Although there may be various options, the classic double peak observed at least medium, if not long-term change of trend from bearish to the bovine. Many potential double peaks may be formed as the ascending trend, but still a key support is not broken, do not turn may be regarded as proven. For a better explanation of the model, let us look at the key moments in the formation and then explain an example.

1. Previous trend: As in any turning the model must be an existing trend to turn. In the case of double peaks, must be present a significant upward trend.

2. First Peak: The first peak should be noted the maximum point of the current trend. It is noteworthy that the first peak is quite normal and upward trend in this period shall in no case is at issue.

3. Depression: After the first reduction peaks occur, which usually ranges from 10% to 20%. Volume on the decline from the first peaks are usually insignificant. Reduction sometimes rounded or slightly extended, which may be a sign of sluggish demand.

4. Second Peak: Increase of depression usually occurs with low volume and encounters resistance from the previous maximum. Resistance from the previous maximum is quite expected. Even after the emergence of resistance, there is only the possibility of forming a double top. The model must still be confirmed. The period between the peaks can vary from several weeks to many months (for a large-scale) with a norm of 1-3 months. While preferred the same vertex, may be some differences. Typically, peak at around 3% from the previous maximum schitaetsya it is permissible.

5. The decline from the top: The subsequent decline from the second vertex must occur to increase the volume and / or accelerated decline, perhaps even with one or two GEPami. This decline indicates that the strength of a weaker demand than supply and testing support is inevitable.

6. Breakthrough of support: Even after the decline down to support a double apex turn, and the trend has not yet been formed. Breakthrough support for the lowest point between peaks completes the formation of double peaks. This should also happen with the increase in volume and / or accelerated decline.

7. Support becomes resistance: broken support becomes potential resistance, and sometimes happens that the new test of resistance at the reactionary rally. Such testing could offer a second chance to enter the market in the short side.

8. Price target: The distance from the point of break of support to the maximum may be deferred to bottom of support for pricing purposes. This means that the larger the formation, the greater the potential decline. While the model of "double peak" may seem simple, traders must comply with the appropriate steps to avoid misleading the double peaks. The tops should be separated at a sufficient distance. If the peaks are located too close to each other, they may just represent the normal resistance and no change in long-term picture of supply / demand. Make sure that the minimum between peaks fell at least 10%. The decline of less than 10% can not measure a significant increase in pressure sellers. After the reduction, Analyze depression to obtain information about the strength of demand. If the depression was brief and has problems with increasing back, the demand could dry up. When the price rises, watch the decline in the next sign of easing as demand.

Perhaps the most important aspect of the double peaks is to avoid premature entry into the market before receiving the signal. Wait until the support is broken convincingly, and typically with a volume. Can be applied filter price or time, to distinguish true from false break of support. Price filter may require a 3% first breakthrough support for confirmation of reliability. The filter may require time to break the support lasted for 3 days before it will be considered valid. The trend is in the Twin Peak (model spread) are not valid until proven otherwise. This also applies to double top. While support is not breached convincingly, the trend is ascending. Formation of double peaks for the shares of "Ford" took about 5 months. Even after a break of support, it was another test the new resistance to almost 4 months later.

1. From a minimum at around 10 in March 1997. price had risen to 36 by December 1998. Trend line, stretching up to March 1997. is an internal trend line, and the price kept above her to a breakthrough in May 1999.
2. From the top of the first price fell by about 15% to form a depression.
3. After reaching a minimum at 30 1 / 2 in early February, the depression formed over the next 2 months before the rally in early April. This long, elongated hollow point to the relatively slack demand.
4. Rally of 30 1 / 2 to 36.80 occurred at a fairly good amount, but cash flow is barely surpassed 10%. Maximum of 36.80 was estimated at 2% above the previous peak, but within 3% of threshold. The distance between two peaks was approximately 3 months.
5. The decline of 36.80 was GEPami with two down and an increase in volume. In addition, the Chaikin Money flow quickly moved below -10%. The speed with which decreased cash flow, indicated a serious increase in the pressure of sales.
6. In late May and early June, the market has traded for about 3 weeks from the previous support level. At this time, cash flow has fallen below -20%. Even though the situation looked quite a predefined model double peak would not be complete until support was broken.

7. The support was broken in early June, when the price fell below the 28 1 / 2, which was more than 3% below the support at 30 1 / 2. After this sharp decrease was the same sharp rise back above the new level of resistance. While testing the broken support completely expected, it usually does not occur so quickly. Increasing to 32 to mark the end of June may have caused some trouble with the holders of short positions, which jumped into the market at the first break of support. The price dropped to a mark 25 and then start increasing the recovery, which ultimately will test support.

The second graph, the level of 30 3 / 4 of the support become resistance level and the level of 31 noted a 50% reduction in recovery come from 36.80 to 25. Combining the price action in early June and early July, the zone of resistance, might be established between levels 31 and 32. Price subsequently formed a lower high at 30 in January 2000. and decreased to about 22 by mid-March.

Forex Magazine
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