Double Top Trade Candidates

On Tuesday night I wrote for column for Investopedia looking at stocks which are forming double top chart patterns. Most of these stocks have also been relatively weak compared to the S&P 500 in recent weeks, and their RSIs are heading into bearish territory. If these four stocks complete the double top formations, evidence points to tradable moves to the downside (or a major warning for those long).

Double Top Trade Candidates

With the S&P 500 SPDR (ARCA:SPY) slumping on July 23 and 24 to start out the trading week, the possibility the market could continue to move lower looms. Therefore, stocks that are exhibiting a potential double top chart pattern present a shorting opportunity as well as a warning signal to the bulls in those stocks. A double top is created by a push higher in price followed by a correction, then another move higher into the same area as the prior high. The pattern is complete and signals another move lower when the price moves back below the low of the correction. If the price moves back above the high(s), then the pattern is nullified. The key to the pattern is waiting until the price actually moves below the correction low to take a short position (or exit longs). The danger of entering early, assuming a breakout will occur, is that the stock could begin to range or move higher before the breakout occurs.

Continue reading on Investopedia:  http://www.investopedia.com/stock-analysis/cotd/DISCA20120725.aspx#ixzz21f9XMZ5T

Regards,
Cory Mitchell, CMT
VantagtePointTrading