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Trade the Bollonger Band Squeeze

Double/triple tops forming

Chart Forum » Stocks - ASX: long term & fundamental » Archive through October 31, 2004 » Double/triple tops forming

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suemac
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Username: suemac

Post Number: 153
Registered: 01-2003

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Saturday, October 02, 2004 - 07:56 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



In my idle moments I have managed a visual scan of my workbooks. Lots of stocks testing/retesting of or double/potential double/triple tops forming:

ACC, ABC, ADB, AGL, AHS, ALL, ALN, ALS, ALZ, ANZ, APE, AXA, BBG, CAB, CIY, CML, COA, CXP, DOW, FUN, FWD, GNS, GPG, GRD, GWA, HIL, IAG, JBM, KIM, MAY, MIG, MTT, MXI, NCM, NFD, NUF, ORG, PBL, PMC, PMG, PPT, RIO, ROC, SFE, SGB, SGT, SHL, SHV, SIG, SPC, STO, SUN, TAP, WAN, WBC, WES, WOR, WOW,

and these are only the ones at the all-time high level. Plenty of others forming at lower highs too. Interesting coincidence with XAO at all-time highs.

Thought this may be of interest to the forum. Comments/ discussion welcome.

Susan


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ingot54
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Post Number: 138
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Saturday, October 02, 2004 - 08:40 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Hi Suemac

You nearly gave me a heart attack!!

I found ROC in your list - my beloved ROC!! I charged into IC to check this sinister double top (or potential). At first I could not see it, but closer scrutiny revealed the little fellow!!

Well, yes, it is possible to say a double top is potentially forming. But the time frame is about 5 trading days - is this valid? And how does one decide what is technically a double top? How much retracement is necessary after the first top, to be able to declare the second top valid?

This concerns me a bit. My personal assessment of ROC is that there is more upside yet, and the current retracement is due to profit taking, as it is at highs not seen since August 1999. Nevertheless, I have my stops primed.

ABC on the other hand is also at all-time highs - for the third time recently. This is close to a triple top - could be a third attempt to break through $1.55

This list is worth following as a watch-list, Susan. Would you be willing to do this and keep the forum informed? I feel something could be learned regarding the time frame, and depth of retracement around the tops, which serve to validate them, or nullify them.

Ivan







"That's Life" does not explain anything!!


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suemac
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Post Number: 157
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Saturday, October 02, 2004 - 09:33 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Woooooooops Ivan, I could almost hear your palpitations from here! I should have learnt a lesson from a while back when I first started charting. I didn't scroll back to the left of the screen to see the whole chart and bought PBL - in a corrective wave of a rather strong downtrend, and dammit, I've done it again here. Nil desperandum!

The resistance level (as it is now! In fact always was), is $1.94 with the all-time high of $2.20 back in 1999. Because I trade with the longer term view a double top five days apart doesn't faze me; there's plenty of them I would think.

I was taught:

1. A stock retraces, 100, 150, 200, 250% (or multiples of 50%) of the distance between the tops and the low between the two peaks.

2. The trend from the second/third peak has changed when you have a lower peak and a lower trough; others say it is not a double top until the trough between the two peaks is taken out. It may confirm the double top but by then it's too late to sell; a more protective action would be to sell half if there is a reversal signal at the double top and you have the change in trend and buy back in if the stock trades back up.

3. The greater the distance between tops, the more significant they are.

3. The closer together the tops, the less tolerance in price, ie a double top of $2.00 five weeks apart would be more "authentic" than a top at $2.00 and $1.90 in the same timeframe.

3. Triple tops are more significant than double tops.

4. If a stock is testing a top for the fourth time, it is likely to go straight through that level.

My reply to a query on the short-term thread might make things clearer.

"I posted the list both in the short and long-term thread; perhaps it should have been posted under the Chart Patterns thread?

I trade longer term so what I'm saying here is I look for reversal patterns at these points; if we have a lower trough you can sell half; if the stock continues up you buy back in. You can also look at it from the point of a trade if the stock trends through the double top, retraces to that top and then takes off on volume. Others may see this situation as an opportunity to go short.

What really caught my attention was the number of stocks with double/triple/potential tops at the same time the XAO was at an all-time high."

Anyway Ivan, happy to keep an eye on this watchlist. I really provided it for a discussion/education exercise. There will no doubt be other interpretations of these but nobody's wrong; we're just trying to trade to maximise the probability.

By the way, turn it all upside for double bottoms!


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ingot54
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Saturday, October 02, 2004 - 10:00 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Wow, Susan -

Thanks for that. I didn't know the significance of double/triple tops to that extent - or how they are validated. I can relax - (ROC - you are safe). I was impressed by the retracement rules - 50%, 100% etc. I am going to check this out further.

You know, I believe the fewer indicators in use (for simplicity), the clearer the decision is. But as time goes by, the student of Technical Analysis moves from using "science" to using "art". I believe this happens because the many indicators previously studied mean something - even if not consciously used. An assessment is made based on the sum of all previous knowledge and experience. That's why some people have moved to the level, where they are able to glance at a chart, and assess the possibility of a trade instantly.

With the XAO at an all-time high, there should be enough buying pressure and optimism in the market to finally push several of these through their resistance lines. By having a watchlist of some of these, one could get aboard an early breakout, especially when some of them have bounced off resistance a couple of times previously.

For this reason, I will also create a watchlist on my trading software, as well as my IC package,and watch out for such breakouts.

I'm sure good can only come from such an exercise.

Thanks

Ivan


"That's Life" does not explain anything!!


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shawky
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Post Number: 406
Registered: 11-2003

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Sunday, October 03, 2004 - 10:54 am:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Sue
Thanks for your list of stocks where you believe double/tripple tops may be forming. Shame you cannot post charts. By all means email me the charts for this thread and I'll convert and post them for you as I am stumped with a few of your assessments and a picture might help me learn.

Hopefully you may be able to use my long term chart on ALL below to explain in what region/timeframe ALL is forming a double top. For I am currently in strong disagreement. I have looked at the daily, weekly and monthly over the past 8 years and the timeframe (D,W,M) made little difference.

Long Term View:
Rally from C to D with 100% retracement to E. Extremely strong recovery to F, with strong Continuation signal in Sep 04. Price target now in the region of $13-$14, but I prefer $15 as a nice round number.




Potential Double Top between A and C but breakout Nov98.
No Double Top at region D though a number of higher highs with troughs did form on the daily chart and one might interpret the two peaks in Aug 01 as a double top but I do not, for each high made a new higher before rejection. I think it was more a blow off top formation, certainly dived quickly shortly after.

Though I did not mark the region on the chart, Sep 03 and Dec 03 may have formed a double bottom but they were actually higher lows which occurred progressively before the breakout.

What I do see is that ALL often develops a 10-20c tight price range both short and long term before breaks. A, C and E between 80c and $1. The low to 60c at B followed by C then a quick run to $1.40 (1.00+1.00-0.6) and then Caboom.

Similarly at D, 700-720 was difficult where price would not go over 710 for long. (see daily charts at these times)

Now at F, ALL paused below 700, but regularly made new incremental highs retreating back quickly. One would have expected strong resistance from D and for some reason this occurred at the 700 mark not the 720 mark, but is consistent with ALL's 20c range pattern.

A new all time high was made at F shortly before the strong break over 720 after a quick pullback to 680 (20c down from 700). No double top here either. Since ALL cleared 740 and in fact has breached 780, it is clearly blue sky with no double top.

I am looking forward to some constructive criticism on my analysis, for if I have got this all mixed up, I need to know where I'm going wrong.

I could post the short term charts for each region if necessary, but hopefully readers can zoom in on those areas themselves.

Thanks again for your posts Sue, much appreciated as I have not researched double tops that much so am a novice in this area.

regards
Shawky


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suemac
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Sunday, October 03, 2004 - 03:47 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Shawky, Have no problem with your analysis; excellent in fact. As I mentioned in the second post, there are several ways to treat these formations. In the case of ALL it could be just to wait for it to trend up and then re-test the $7.32 before buying in.

I forgot to mention in my previous post that when there is a double top and a double bottom, the one further apart dominates. So in the case of ALL, the double bottom would dominate and you are quite right in your projection of price: 150% $10.76; 200% $14.10; 250% $17.43.

Now we all know it's not going to happen overnight; this is the long-term thread after all!








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suemac
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Sunday, October 03, 2004 - 04:33 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Shawky, Forgot to mention, now I seem to have the hang of the charts, let me know which ones don't seem to match what I'm saying. By the way, MGW should also be on the list.

Cheers!

 
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