Topping Stock Price Action

Candlestick Chart Patterns that Reveal Potential Tops

One of the more challenging aspects of being a Technical Trader or Retail Trader in today’s automated market is that the candlestick patterns of Technical Analysis are changing. In particular Topping Stock Price Action is often the most problematic as traders are not aware of the changing dynamics of Tops.

How candlestick patterns form, and in particular how Topping Candlestick Patterns form are undergoing massive changes. These changes are due to new types of professional orders, new trading venues, and more Market Participant Groups all trading for different reasons with different share lot sizes and capital resources.

It used to be that the Head and Shoulders Topping Formation occurred quite often, which is usually best seen on a long-term chart view such as weekly or monthly.

Now true textbook perfect Head and Shoulders patterns are rare. Those that do form are not classic Head and Shoulders Tops but deviations and distortions of that once easy to recognize pattern. M Tops are also not as common and are often distorted, which alters how price behaves after the Top completes.

Oftentimes Head and Shoulders Tops do not fall the length of the head, but find support slightly below the low of the right shoulder as an example.

On the short-term trend for Topping Stock Price Action, there are new formations that are often missed by traders who have yet to learn all the new ones including Flat Tops, Sheer Cliff Tops, and many more.

The chart example below shows an Inverse Asymmetrical Top Formation on the short-term trend.

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Martha Stokes CMT

TechniTrader technical analysis using a MetaStock chart, courtesy of Innovative Market Analysis, LLC dba MetaStock

Chartered Market Technician
Instructor & Developer of TechniTrader Stock & Option Courses

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