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Double Top Pattern on GPT Group (GPT)
As traders, we use technical analysis as a reliable method for speculating on future price direction of both equities (shares) and indexes. Technical Analysis in simple terms is the study of historic price movements in a chart in search of patterns or consistently traded support and resistance levels. Today we are looking at a Double Top.
Appearance: A double top Looks like a ‘M’ shape and comprises of:
- A strong rally usually to elevated price levels,
- A bounce off a resistance level (old or new),
- A reversal heading bearish,
- The bearish move comes down to a support level (old or new) and again reverses with bullish movement back towards the previous resistance,
- Failing at Resistance a second time is the first indication of the double top,
- The pattern isn’t confirmed until the support level breaks.
Pattern: The Double Top Pattern is a common chart pattern that can appear after the fact in a bearish market. The idea is to recognise it during the second bounce from resistance, watching the formation early on. Once that support breaks, it is a strong broader reversal pattern, and you can look at managing your positions.
Important Note: The Double Top is only confirmed once it has broken the support level and continued lower. If this doesn’t happen, you would be either looking at a channel forming, or a continuation pattern with further bullish movement.
Example: GPT Group
GPT looks to be almost forming this pattern, with the share price having recently reversed off the resistance level, to fall and test support; breaking the support would be the final piece to complete this pattern. If GPT can continue to sell off and break the support at $6.13, we will likely see a move lower for the same distance as we saw from the support line to resistance. In the below chart I have drawn a line from support to resistance, and then moved it lower to give me an estimate of how far the fall will be – the dotted line. Coincidentally, you can also see this stock formed the exact same pattern back in March/ April and continued to sell off further than the expected fall.
There are many ways that you could take advantage of these patterns. As a specialist in derivatives, we are able to profit on a stock when it falls as well as when it rises.
If you would like to learn how to pick a stocks direction, then Join us at our live face to face one day “Technical Analysis, Picking the Direction of a Stock” course.
Contact us today on 03 8080 5788.
Regards,
Your Freedom Fighter,
Benjamin Farkas