January 2012
Intermediate to advanced
624 pages
17h 49m
English
Chapter 12
Double Top Bear Flags and Double Bottom Bull Flags
A bull trend often ends with a double top, and a bear trend often ends with a double bottom. Since a pullback in a bull trend is a small bear trend, this small bear trend can end in a double bottom. Because it is a pullback in a bull trend, it is a bull flag and can be referred to as a double bottom bull flag. It is two legs down in a bull trend, and therefore a high 2 buy setup. It is a particularly reliable type of high 2 buy setup, so I generally refer to it as a double bottom to distinguish it from other high 2 patterns. Likewise, a pullback in a bear trend is a bear flag and it is a small bull trend, and that small bull trend can end with a double top. If it does, that double top is a double top bear flag.
In a bull trend, bulls often trail their protective stops below the most recent higher low, because they want the trend to continue to make higher lows and higher highs. A double bottom bull flag is, in part, due to bulls defending their trailing stops below the most recent swing low. If the market falls below the most recent swing low, traders will see the bull trend as weaker, and possibly over. That would be a lower low, and they would be concerned that it might be followed by a lower high instead of a new high. If so, the market might be forming a two-legged correction (a large high 2 buy setup), or even a trend reversal. Because of this, if the bulls have a lot of conviction in the trend, they will buy heavily ...
