When a chart is plotted with the data and if we found there are two tops formed which are very much similar we can say a double top is formed, it will look like a Letter “M”. The twice touched high is considered as a resistance level. If the stock moves down again after touching the high which was previously formed then we can considered the trend is bearish.
When a chart is plotted with the data and if we found there are two bottoms formed which are very much similar we can say a double bottom is formed, it will look like a Letter “W”.
The twice touched low is considered as a support level. If the stock moves up again after touching the low which was previously formed then we can considered the trend is bullish.
The line chart pattern appears to be shoulder, head(with high top) and a shoulder formation is called as head and shoulder. Head and shoulder mainly happens during the distribution or accumulation of stocks from strong hands.
Condition for bearish trend
Shoulder, tallest head, shoulder formation with 3 months duration.
Volume is high at left shoulder and low at the right shoulder.
