Winning In The Stock Market
Professional traders kill amateur traders in the stock market with double top and bottom patterns. Do not be another victim. In fact, after reading this article you will be able to get the revenge you deserve.
Every rally in the stock market reaches a point where enough bulls look at it and say"I've made a lot of money, and I might make even more money, but Id rather take my profits off the table. Charts top out when enough bulls take their profits, while the money from new bulls is not enough to replace what was taken out.
Bulls who are still long are screaming mad, especially if they came in late. They feel trapped. Their profits are melting away and turning into losses. Should they hold or sell? If enough bulls decide the stock has overshot to the downside, theyll step in and buy. As the rally resumes, more bulls come in. Now prices approach the level of their old top, and thats where you can expect sell orders to hit the market.
Many battle scared traders who got caught in the previous decline take a blood oath to get out if the market gives them a second chance.
A mirror image of this situation occurs in the stock market at market bottoms. The market falls to a new low at which enough bears start taking profits by covering shorts and the market rallies. Once that rally stalls out and prices start sinking again, all eyes are on the previous low-will it hold? If bears are stronger than bulls, prices will break below the first low, and the downtrend will continue. If bears are weaker than bulls, the decline will stop near the old low, creating a double bottom. Technical indicators help decipher which of the two is more likely to happen.
Whenever you see a stock climb to its previous high, the first question in your mind should be will the stock climb to a new high or form a double top and head back down. Technical indicators like the RSI, MACD, and volume are very helpful in answering this question.
When a stock rises to its previous peak, a double top is most likely to form when the volume, MACD, RSI, and stochastics are falling.
A double bottom is most likely to form if the MACD and volume start rising when the stock hits its previous low. - 23196
Every rally in the stock market reaches a point where enough bulls look at it and say"I've made a lot of money, and I might make even more money, but Id rather take my profits off the table. Charts top out when enough bulls take their profits, while the money from new bulls is not enough to replace what was taken out.
Bulls who are still long are screaming mad, especially if they came in late. They feel trapped. Their profits are melting away and turning into losses. Should they hold or sell? If enough bulls decide the stock has overshot to the downside, theyll step in and buy. As the rally resumes, more bulls come in. Now prices approach the level of their old top, and thats where you can expect sell orders to hit the market.
Many battle scared traders who got caught in the previous decline take a blood oath to get out if the market gives them a second chance.
A mirror image of this situation occurs in the stock market at market bottoms. The market falls to a new low at which enough bears start taking profits by covering shorts and the market rallies. Once that rally stalls out and prices start sinking again, all eyes are on the previous low-will it hold? If bears are stronger than bulls, prices will break below the first low, and the downtrend will continue. If bears are weaker than bulls, the decline will stop near the old low, creating a double bottom. Technical indicators help decipher which of the two is more likely to happen.
Whenever you see a stock climb to its previous high, the first question in your mind should be will the stock climb to a new high or form a double top and head back down. Technical indicators like the RSI, MACD, and volume are very helpful in answering this question.
When a stock rises to its previous peak, a double top is most likely to form when the volume, MACD, RSI, and stochastics are falling.
A double bottom is most likely to form if the MACD and volume start rising when the stock hits its previous low. - 23196
About the Author:
Written by Sean Phelps. I hope this lesson makes you a ton of money. For more FREE cash pulling secrets visit the most popular stock trading blog on the Internet by going to stock market
posted by X - Men @ 1:56 AM
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