How to Identify Topping Stock Price Action?

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

This is one of the most dangerous tops for traders who use Buy on the Dip or Limit Order entries. Professional Traders abandoned Limit Orders quite a while ago, and are using alternative orders to control their entries which avoid the huge risk of entering on a low and discovering the entry is not a Dip but a Downtrend.

The risk factor of the Asymmetrical Triangle is that most traders are not thinking of this pattern as a Reversal Pattern. Many are not even aware that a triangle can expand rather than contract.

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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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