Novice Traders' Notebook  |  JAN 1998

Double Tops by Thomas Bulkowski

Double Tops by Thomas Bulkowski It takes more than twin peaks to make a double top. Here's a refresher on the formation. Double tops aren’t hard to identify. Novice investors with just a smattering of technical knowledge can identify any two peaks close together as a double top. But there’s more to double tops than simple identification, and in my study of the formation and creating subroutines to recognize them, the selection criteria came into sharp focus. A good example of a double top is shown in Figure 1 and distinguishing characteristics are outlined in Figure 2. The twin peaks are the first thing you’ll notice in a double top. The classic definition as suggested by Robert Edwards and John Magee in Technical Analysis of Stock Trends indicates that the peaks should be no closer than one month apart, and two to three months of separation is more common. In my tests, I used a two-week minimum separation but also filtered the results to obey the classical definition. The figure shows two peaks about four months apart.

by Thomas Bulkowski