Double Tops and Bottoms
Another important reversal pattern is the “M” or “W” shaped pattern called a double top or double bottom, respectively. This is essentially a head and shoulders without the head. One important difference is that while a head and shoulders is more dramatic, it is also less strict in its definition. The neckline need not be horizontal but can be on an angle. The double top and bottom requires that it be based on a true support or resistance level.
The weekly chart of the Australian dollar (see Figure 10.5) shows a double bottom that formed over an eight-month period. Prices corrected from their January lows to their April highs. Note that these highs met resistance at a previous congestion zone formed a year earlier (support ...
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