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Double Top Correction - BABA and NFLX

Kristin Alonzo

07-Sep-2018 19:08 PM

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The " double top" pattern is commonly used as sell signal or profit taking time for traders. 

#BABA printed high of $211.70  followed by 2nd rally attempt of high of $211.12, this price action is considered double top with lower high price action. The first support was at textbook 200dma < -14% from the $211 high>, then the second wave of sell-off was triggered when #BABA lost the 200DMA support.  See chart below** 

When the stock prints this precarious double top pattern, you have to set your price adjustment on stop-loss < if you have long position>.  Remember that everything in price action is a process, if you have taken a short position on the initial double-top pattern, expect at least 2- 3 weeks before intensive selling occurs.

#NFLX another sample of lower high double top pattern - first high at $423.71 followed by $419.77 high, 3days later the selling occurred.  Netflix correction took 4 weeks before it found its support - why?  Take a look at the variation of the daily moving average. The 200DMA is -26% from the second double top high $420 < unlike Baba it was only at -14%>  remember that it takes a process. 

**When a Corporation announces significant underlying bad news -  lowered earnings, financial audit, data readout, etc. - such an event is an exception to the rule of " processing time"**.

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