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Is there a chart pattern called a double lower high?

Is there a chart pattern called a double lower high? I ask this question not just technically but functionally as well. Certainly if someone knows where an expert has deemed this as an official pattern, I am very interested in a reference to that. However, I am specifically looking at the weekly chart of IWM which have been following closely for months. In early March and late June it seemed to form a double top. Then in early Sept a lower high formed. Now it appears that it may be turning down again at the level of the lower high. Is this common?

Note, it does appear that in both the case of the double high and now this possible double lower high that the second hump went slightly higher (on an inter-week basis) than the first did. But I don't know if that is a problem since this is an ETF, not a single stock.

Thanks for your thoughts.

Best Answer

  • markdmarkd mod
    Accepted Answer
    No, I think we need a bar like July 8 or Sep 19, decisive down bars that buyers don't answer, before we can be more certain of lower prices.

    Intraday today, so far it looks like sellers tried to take out the gap 10/30-31, which jumped the open of 9/19 - where sellers came in in force (higher open, close way down on high volume).

    The gap was bulls trying to take back that seller "landmark", which they did, but there was no follow through. Seeing no follow through, sellers came back in, closed the gap, but without the force of 9/19, and buyers right now seem to be responding to "defend" the gap. So sellers haven't re-taken control yet.

Answers

  • No such pattern in Edwards and Magee. There is reason to believe IWM has started a bear trend (lower high, lower low; also diminishing RS vs. $SPX in the last six months suggest money going to big caps right now). In bear trends, a slightly higher high, where bulls appear to have regained their strength, is often a selling point. Sellers have to come in in strength to re-assert the bear trend. If they don't, then a range develops until one side does re-take control.
  • Thank you. That helps. Would you say that bears have sufficiently come in with strength in the last 5 days? In that 5 days there have been 4 down days compared with 3 down days in the first 5 days after the double top, and the same (3 down days in the first 5 days) after the lower high. I am not sure I see a lot of difference in the volume on down days in November as compared with that after the lower high. The bars on 11/13 and 17 were not as well formed as the bar on July 7 or even Sept 2. But do you think they were formed well enough?

    Or do we need to wait a bit longer to see if the bears have exerted their dominance?
  • I see the many aspects of the strength of the bar on Sept 19 and how that relates to the bullish victory of the gap on Oct. 30-31, and how that relates to the battle going on yesterday and today as the bulls try to "defend that gap". Fascinating.

    As far as the strength of the bar on July 8 I do not think I see all of its strength. I see that it is decisive follow-through to the nicely formed candle on July 7, and I see the strong volume (above average and big increase over the previous day which itself was double the volume of the up day before). However, I would have thought that the tail on July 8 said that the bulls fought back. What am I missing?

    Thanks again.
  • markdmarkd mod
    edited November 2014
    Yes, on July 8, the bulls attempted to make a stand at the open/low level of June 25, the last place they had taken control (for the rally to the July 1 high; June 25 opened down but closed at the high; sellers failed to follow through on their June 24 strength, allowing buyers to resume the up trend then in place).

    But July 9 the bulls' follow through was weak. Bulls needed to at least close above the July 8 open, where sellers had asserted control (displayed good strength by moving price down on higher volume). Note on June 25, buyers got back to the prior open in just one bar demonstrating enough strength to attract more buyers back to the uptrend.

    On July 10, bears crashed through the June 25 support. Bulls immediately responded, but weakly, and the June 25 low support turned into resistance.

    I might also add, on the July 10 close, you would have had pretty good reasons to enter: the long term trend (251 days) was up, the intermediate trend (63) was turning back up, a lower low in an up trend is often a good buy, the low was in the body of a strong up day (June 5, often a good entry also), and buyers had closed the day up on a day when sellers had broken support. But July 11 would have been discouraging because there was no follow through, and July 14 was a sign of serious trouble - opening higher and closing below the open - that shouldn't happen in a good up trend, so you would want out because the trade was not performing.
  • Thanks. This was helpful and the last paragraph an interesting "walk through a potential trade".
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