Double Trouble

[jonbig04 10]

It may be just me, but it seems that for such a PA oriented community (for the most part) there really isn't that much discussion here about patterns. Since there are about a zillion, I would like to keep this thread focused on the double bottom and double top. There's quite a few variations of these two patterns and they seem to happen quite a bit, on all different time frames.

 

Rather than only explaining what a double bottom is, since I'm sure we already know, it would be great if those interested could post examples of patterns they are watching or trading. I want to make clear that I am no expert. I just started implementing these a few weeks ago, but already I feel I have a better understanding where price may go. I noticed that SuriNotes posts in here every now and then, it would be great if he stopped by to show us the ropes.

 

It would be great if we could point out some patterns that are forming now, but maybe haven't confirmed or have just recently confirmed. This way we aren't stuck on a bunch of hindsight analysis and can actually describe patterns now, in foresight and we can see what happens in time. I for one have had it up to here with hindsight analysis.

 

So here goes. When it comes to longer term analysis my mind tends to want to go off the PA track. :doh: However the pattern that was confirmed today probably shouldn't be ignored. ES confirmed a very large W bottom today by breaking the mid point at 884. Long term trend (hourly chart) in my view is down. Sellers have been flipping support to resistance like nobody's business, but to me this is bullish. Sellers have broken established R with a vengeance. The great thing about this pattern is that if it works, it signals the start of a whole new trend! There will be all kinds of pullbacks to buy potentially as this is just the beginning. And if it fails, we can trade that too!

 

 

This is a 150k CVB chart, so we are talking about a large pattern, and potentially large reversal here and possibly some significant upside. I would anticipate a possible retest of the midpoint of 884 from the other side, but thats beside the point. We have a confirmed pattern and we can all watch to see how it plays out.

 

I would like to point out something important that I don't see many people talk about and that is simply that the failure of this pattern should provide us with just as much information as the confirmation did. In my view, that would happen if price takes 866. I would be just as happen to take that trade as I would be to take long today when it confirmed. So now we can watch and wait. I will update this thread every few days with price's progress relative to this pattern.

 

It would be great to see some more DBs or DTs. The W and M are just 2 types. I've seen the 2b/2t variation, the dragon which confirms via trendline, adam-eve etc etc. Also feel free to post whatever time frame you would like. I personally see great stuff on the 30k CVB and intraday charts. I posted this one because it seemed like a big deal potentially.If no one is interest I guess the thread will die out on the vine, but I think we can all learn something from these reliable, reoccurring patterns.

[jonbig04 10]

As promised its time to analyze the PA after our very large W bottom confirmed (note the confirmation happened when price broke 884). So here goes:

 

 

 

 

This is on a smaller TF (100k CVB), but since our W confirmed what has price done? Well in short its rallied almost 50 points in 2 days. The only complaint would be that the rally has been so furious an entry might be difficult to gain, but that's entirely dependent on your particular entrance strategy. I personally view patterns as a way to figure out which direction price is headed (with the added confluence of major S/R levels), so in that area this W has been pretty damn impressive. Other than that, until (and if) price gets back to 898 or 884 I guess we can leave this pattern alone. IHMO it did its job pretty well.

 

I will continue to post patterns as I find them.

[thalestrader 14]

If no one is interested I guess the thread will die out on the vine, but I think we can all learn something from these reliable, reoccurring patterns.

 

Hi jonbig,

 

I think this is subject for a thread. I'll be happy to contribute charts as they develop.

 

Thank you for sharing this with us, it certainly was prescient!

 

Best Wishes,

 

Thales

[Dinerotrader 10]

I would have thought this a reasonable bullish flag chart breaking out at the blue arrow but as I was getting the chart ready to post it reversed back. My chart pattern experience is limited so I still have a hard time knowing when a pattern fails or when it just isn't strong enough to give a solid signal. I would have hesitated taking this because after such a strong trend from yesterday, I remain very suspect that today would more likely be consolidation or a pull back day.

 

[Dinerotrader 10]

I just realized my chart is excluding evening trading so I think that negates the value of the pattern. Sorry about that.

[jonbig04 10]

Thanks for the chart imorgan. I want to disclose again that I am NO expert and you should take all of this with a grain of salt. I am simply going to explain what I would personally do, or see. The first point I want to make is that I wouldn't consider this a DB. I use Suri Dudella's definition(s). The main reason I wouldn't consider this a DB is because we aren't in a down trend. The idea behind a reversal formation is trend change, not trend continuance.

 

 

Of course "trend" can be defined a million different ways and they could all be correct, but looking at this chart in particular, I think we can all agree that trend is up. If I was trading this I would zoom in on the spots I highlighted (if these were major S/R levels that I already had marked) and look for double bottoms there on a smaller time frame. From a smaller time frame each leg of this pattern would be a downtrend and thus we would be looking for a DB on that chart to enter and ideally ride this larger term trend. This is what I tried to do today, but price didn't give me clear DB signal at the 926 area.

 

The second point I would like to make is that this looks more like a double top (DT). For me personally, my patterns have to occur at major areas. The peaks should be at major areas and so should the mid points (hump). For chart's sake lets assume I had 930 as major R (I actually had 926, which is way I didn't trade this. For me 926 R had been broken so I wasn't thinking 'short' at all, still looks bullish). But if I did have 930:

 

[Dinerotrader 10]

Jonbig,

I wish I could take that post back now for sure. I somehow got in my mind that we were going to look for more than DB or DT chart patterns. I reread your initial posting and I am now clear on the direction of the thread. I apologize. I will come back with hopefully, a more productive post. Love the thread idea.

 

Cheers.

[jonbig04 10]

Jonbig,

I wish I could take that post back now for sure. I somehow got in my mind that we were going to look for more than DB or DT chart patterns. I reread your initial posting and I am now clear on the direction of the thread. I apologize. I will come back with hopefully, a more productive post. Love the thread idea.

 

Cheers.

 

Oh its no big deal, if thats another pattern then I would love to learn. My earlier post was my opinion, nothing more. I'm sure better traders would have other opinions. I would be interested to see different takes on PA. Everything is welcome!

[jonbig04 10]

I wanted to get this up in the AM before this pattern confirmed or failed.

 

[jonbig04 10]

Update. Well, out pattern didn't confirm, or fail. The top was tested and it bent a bit (faking me and some others out), but all in all there was more rejection at the 955 area. I will update the pattern again tomorrow morning. It looks like its trying to form a triple top as we are now at 949 after having been rejected at 956. I will wait for globex to play out before posting anything else on it.

[jonbig04 10]

Hope its ok if just put my journals chart up here. I'm running short on time today as I'm moving tomorrow.

 

[jonbig04 10]

Remember the failure of this pattern (like the DT failure above) is just as important and the confirmation of it (though I don't see this one as important as that last one).

 

[jonbig04 10]

W Follow-up

 

[jonbig04 10]

Last pattern was a tough play IMO. I didn't capitalize off of it. So here's another and we'll see how it works out. I'm hoping for a breakdown

 

 

Errr technically this is a triple top, but whatevs.

[jonbig04 10]

I hope some of you benefitted from this!

 

[jonbig04 10]

My last post was on the large double (or triple) top that occurred at 1015.75 ES. We saw how price continued to break down hard after this patten confirmed (price broke the midpoint at 990). What happened next was equally interesting. Price broke all the way down to the 977 area where it gathered itself and actually formed a nice double bottom, but I won't get into that here. I mentioned in the beginning of this thread that the failure of major patterns was just as significant and playable as their confirmation. We know that in order for this large double top to fail, price would have to break through 1015.75. We know that such a failure could foretell and explosive move up, just as the confirmation foretold an explosive move down. Well it turns out price DID break through 1015.75. Here's a zoomed in view of what it looked like when it happened.

 

 

If thats not an explosive up move, I don't know what is. the 10:01 bar is the bar that took 1015.75, as you can see it showed some massive activity there. Just another way to use a pattern to make your trading decisions.