And this video we're going to take a look at.
Double tops and double bottoms.
And as it sounds like a double top is two times hitting the top or a double bottom is two times hitting
the bottom.
Simply a price that the market can't get through in either direction.
Sometimes you'll hear them referred to as M and W patterns they're very prominent and important signals
once you get them they don't have to be to the point didn't have to be the exact same price but you
want them close they are reversal signals.
This is a bearish reversal signal showing that we can't get above this level here and this is bullish.
So looking at the chart you can see clearly that we had been breaking down and there's two areas here
on Johnson and Johnson on the daily chart right around I'd say around 110 111.
The market can't break above and that's a good sign that the buyers are going to take over again.
You can play this a couple of different ways.
This is an w that I had mentioned previously.
Some people will wait for a break of the W.
Now that's an extraordinarily cautious way to play.
But the idea is you can extrapolate this is one 11 to 120.
That's a nine dollar move.
So you're looking to hit 129.
And that's exactly where we go to right off the bat however I prefer to play it as such.
I see the double bottom and as soon as I see it break what would be the middle of the W I go along there
I still wait to see if we break out above there and once we do I still extrapolate the same move as
if I had gone long on a break of the W.
This gives you in this case an extra say three or four dollars on the trade which can make quite a bit
of difference on one hundred shares three or four hundred dollars or a thousand three or four thousand
dollars.
That type of thing.
So that is an example of a double bottom over here we have a double top and it works the same way.
You can see that clearly in Wayfair fair on the daily chart.
We could not get above 150 dollars.
I like this trade a lot because 150 is such an important psychologically large number.
You can see that we do have the M pattern here and right at the 130 level you would have broken the
bottom of that M pattern.
So you're looking for a move down to 1 10 because it is 20 dollars.
Now this particular M pattern there is no early entry because the bottom comes all the way down.
So unlike the other one which flipped over as an M would look probably more like this and you could
enter there you actually had to wait till there is a nice easy move it's 20 dollars it's very obvious
once you've shorted you know you put your stop somewhere in about the middle of it because either it
works or it doesn't.
And then once you get some profit you can lock your position down to a break even scenario you hit your
target very easy obviously these are very important signals higher timeframes mean more than shorter
time frame to keep that mind that's true with almost everything technical analysis related anyways and
it is a very profitable way to trade when you get these signals because they don't happen all the time
especially when they are at such obvious large figures like one hundred fifty dollars.