The ALLCO Finance Group (AFG) Double Top
The ALLCO Finance Group (AFG) Double Top
In former 2007 the stock had an top breakout from a integration at 10.00 and ran up to additional than 13.00 The stock fell back from 13.00 to a reply low of 11.50 and then ran up to attain top 2 at 13.00 while it then collapsed to a low of 10.00.
Technical Signals
1. Prior Trend: Like other reversal patterns, there must be a trend present to reverse.
2. First Peak: The start fresh high must mark the top of the latest trend. This peak is generally acceptable and normal in an uptrend. There is no concern about position at this moment in time.
3. Trough: Following the first new high (top 1), a retraction in price occurs and its range is approximately 10-20%. Due to the decline from the first high the volume is generally regarded as insignificant.
4. Second Peak: To ensure a convincing double top has formed, it is essential that the volume declines rapidly as the share price attempts to retest the recent new high (top 1). It should be anticipated that resistance will be met upon the retest. This pattern still needs confirmation at this stage.
5. Decline from the High: The following decline from the second high will observe an increase in volume and a possible associated accelerated fall. The share price could possibly gap lower. The strong fall represents the supply outweighing the demand and retractions to support levels are looming as a real possibility.
6. Support Break: the duplicate top design is simply complete when a break of the reply low has transpired. The share price might trade down to its support level, the pattern of double top and more importantly trend reversal is not fulfilled. To complete the double top you must have a break in support below the lowest point between the two peaks. The following decline from the second high will observe an increase in volume and a possible associated accelerated fall.
7. Support turned into Resistance: Pullback breakouts usually have 2-3% declines before attempting to retest the breakout point. Whenever for any cause the percentage cost closes over the breakout level it will turn a fresh support level, thus the pattern becomes invalid. If the support levels are broken there becomes a chance of impending resistance with a possible test of this newly found resistance level amid a small bounce in share price, commonly known as a reaction rally. At this point, it gives the trader a chance to close a losing position or take an opportunistic approach and trade this market to the short side.
8. Price Target: Generally, a good indication is the following calculation - by measuring the distance between the support break level to the peak and then subtracting it from the support break. This will give you the approximate price target. Predictably this gives the trader an understanding, the larger the structure the greater the potential for an expensive decline in price. Anticipated swing trades are executed at breakpoints through to reaction lows, although it is more common to let the share price fall lower than the reaction low. It is expected to get a rally back up to the response low. This is the most appropriate time to begin to trade the share short. You will need to place a stop order just above the reaction low. It is acceptable to sell into the market to the first top; you will ask to place the stop loss just above that top.
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