DecisionPoint

Double-Top To Double-Bottom?

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Ah, the bull market that wouldn't die. The DP Chart Gallery revealed some interesting charts today, starting with the SP500 Daily Chart. What appeared to be a bearish double-top formation is now looking like a bullish double-bottom. Maybe it is time to chalk it up to being a trading range as I have heard discussed by technicians recently. 

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As soon as price bounced off of support drawn at the double-top neckline (1), that formation was voided. That bottom has formed the second bottom in the double-bottom formation. Now we wait to see if the double-bottom formation neckline (2) will be penetrated...or do we simply see more sideways consolidation? 

The CVI is pointing to a possible breakout and execution of the double-bottom formation. Notice that when the CVI pops up through declining tops resistance, we generally see a price bottom. The somewhat climactic behavior on the Participation Index - UP also looks like an initiation climax.

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The PMO, ITBM, ITVM and VTO all turned up which is good, but I also note we got a "false positive" at the time of the last price bottom when all four turned up and then fell again.

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Indicators are leaning toward a positive outcome for the bullish double-bottom formation, but looking at past price behavior, we could see more price consolidation when resistance is hit at the top of the trading range of the last few weeks.

 

Erin Swenlin
About the author: is a co-founder of the DecisionPoint.com website along with her father, Carl Swenlin. She launched the DecisionPoint daily blog in 2009 alongside Carl and now serves as a consulting technical analyst and blog contributor at StockCharts.com. Erin is an active Member of the CMT Association. She holds a Master's degree in Information Resource Management from the Air Force Institute of Technology as well as a Bachelor's degree in Mathematics from the University of Southern California. Learn More
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