The Stock Scalpers wrote a post · Jul 4, 2021 17:18

DT and TT

Double and Triple Tops

Understanding Double and Triple Tops:

As you become more comfortable trading and analysing charts you will come to notice formations known as “Double”(DT) or “Triple”(TT) tops. These formations are extremely common and are widely used by technical analysts to find entrance and exit points.

While a DT or TT is forming you will see the price action try and break through the previous high and fail. The price will then drop until more buyers enter and drive the price back up to test the previous high,

This back and forth with constant rejection at a fixed price point can be a sign that buyer interest is waning, (Conversely, a topside breakout is a sign that seller interest is subsiding) This is why the DT and TT are seen as TREND REVERSAL FORMATIONS. When the price breaks out of the current channel, in either direction, it often signals a trend reversal.

Retests and slight corrections (2nd chance)
After the initial breakout there will generally be what is known as a “retest”. A retest is when the price drops after the initial breakout and tests the previous resistance (Now the speculated support).

I use the next candle after the retest as my signal to enter if I missed the initial breakout. A candle reaching higher highs after the retest is a well established signal of a continued uptrend.

Using DT and TT:

As you can see in figure A, the DT and TT can be used to signal an exit or an entry. It all comes down to how YOU choose to trade. A downside breakout can be a signal to sell if you are holding a long position or it can be a signal to open a short position.

If an upside breakout occurs it is your signal to open long positions or to close your current short positions.

Happy Trading Everyone!