WEBVTT 00:01.380 --> 00:01.890 Hi everyone. 00:01.890 --> 00:06.120 Welcome back to this wealthy education course on technical analysis. 00:06.120 --> 00:11.610 Today we're going to be talking about reversal patterns and specifically the double top and the double 00:11.610 --> 00:18.470 bottom a double top is when a stock trades up to resistance level two times in a relatively short time 00:18.470 --> 00:25.110 frame and a double bottom is when a stock trades down to a support level two times in a relatively short 00:25.110 --> 00:25.950 time frame. 00:26.750 --> 00:34.130 As you can see from the graph on the left we have the stock in an up trend it moves up to a resistance 00:34.130 --> 00:34.890 level. 00:35.270 --> 00:45.840 Has a pull back to pull back low moved up a second time to the resistance level and then pulls back 00:46.290 --> 00:51.100 and Dives lower than the first pullback low. 00:51.150 --> 00:57.340 So basically with a double top you have sort of an EM pattern and with a double bottom you're going 00:57.340 --> 01:06.270 to have a W patter and when the stock breaks out of the pattern as it does here on the right side of 01:06.270 --> 01:13.890 this graph and moves lower that is your signal to either sell the stock if you're long or go short the 01:13.890 --> 01:14.380 stock. 01:14.430 --> 01:20.460 The psychology behind the double top is that the stock has traded up to resistance and has failed to 01:20.460 --> 01:21.870 penetrate higher. 01:21.900 --> 01:24.970 So the bulls have started to lose control. 01:25.040 --> 01:32.510 The stock hasn't pulled back and instead of rising and going through resistance the second time which 01:32.510 --> 01:39.920 would confirm the bullish pattern the stock peters out at the top a second time showing that the Bears 01:40.310 --> 01:43.710 are now in control of the stock and then the completion of the pattern. 01:43.730 --> 01:50.420 When the stock drops lower than the first pullback and they can't say reversal in the bullish trend 01:50.720 --> 01:56.870 and that the Bears are now in control of the stock and the same is true for the double bottom with the 01:56.870 --> 02:04.700 psychology being that the stock that has been in a downtrend is now reversing course because it has 02:04.940 --> 02:09.490 failed to break through a support level two times in a row. 02:10.490 --> 02:17.990 And now the bulls are taking control as they take it higher than the pullback high reached and the double 02:17.990 --> 02:19.420 bottom pattern. 02:19.430 --> 02:21.310 Let's see what this looks like on the chart. 02:21.710 --> 02:27.960 Let's take a look at a double top and the chart of Advanced Micro Devices or HMD. 02:27.960 --> 02:32.910 We have the stock in a clear uptrend moving up here. 02:32.950 --> 02:35.080 We have a pullback in the stock 02:39.240 --> 02:50.640 and then another attempt to get through a resistance level the high that has been set by the stock previously 02:52.180 --> 03:01.870 and then moved down in the stock as it breaks through this level right around 31. 03:01.920 --> 03:07.440 That's the point where we want to go short the stock so you can see we have the same pattern as the 03:07.440 --> 03:09.100 bulls are in control. 03:09.210 --> 03:12.180 They lose control and the stock pulls back. 03:12.480 --> 03:19.470 But if the stock were to continue higher here in late September and break above this resistance level 03:22.920 --> 03:28.650 then the bowl move would still be intact but the stock doesn't it pulls back. 03:28.770 --> 03:38.830 Now if it were to hold the support level now and move higher it would still be a buy and still be in 03:38.830 --> 03:41.140 the bull pattern. 03:41.270 --> 03:45.200 But the stock breaks through here in late September. 03:45.600 --> 03:51.060 To the downside now when the stock breaks to the downside that's what we want to either sell our long 03:51.060 --> 03:59.150 position that we've held during this bull run or we may want to go short the stock as it completes the 03:59.150 --> 04:00.290 double top pattern. 04:00.290 --> 04:10.610 So that's a double top and HMD reversing a bullish pattern with the stock now and a bear trend now like 04:10.610 --> 04:18.440 a double bottom and the stock of Intel the stock is in a bearish trend and makes a bottom here right 04:18.440 --> 04:21.300 around the 33 and a half level. 04:21.380 --> 04:24.330 The stock bounces higher. 04:24.650 --> 04:29.290 The W.M. pattern do not have to be perfect. 04:29.470 --> 04:39.420 The stock then comes back retest the low for a second time and then finally moves higher goes through 04:40.020 --> 04:40.660 the pullback. 04:40.650 --> 04:47.900 Hi continues higher at this point. 04:49.270 --> 04:56.720 That we would have either cover short positions we may have had in the stock or go long the stock as 04:56.720 --> 05:00.930 it completes the double bottom pattern and moves higher to the upside. 05:01.250 --> 05:07.570 So that's a double bottom in the stock of Intel thank you for watching this video on the double top 05:07.600 --> 05:12.730 and the double bottom reversal patterns and our next video we'll be talking about another type of reversal 05:12.730 --> 05:13.150 pattern. 05:13.140 --> 05:17.330 The head and shoulders pattern and the reverse head and shoulders pattern. 05:17.480 --> 05:19.120 I look forward to seeing you in the next video.