DOUBLE BOTTOM AND SIMPLE SELL SIGNAL
A simple SELL signal happens after a double bottom has been made. So you will ask me what is a double bottom.
Once again I have taken the chart of Nifty for the purpose of understanding double bottom. Look at the chart to the extreme right. At 5600 Nifty made a double bottom. A double bottom is formed, when there are two adjacent O’s without anything in between. From (9) i.e month of September, the nifty rose from 5300 to 5800 and then fell once again to 5600 to make the first part of the double bottom. Then it rose again to touch 5750 and thereafter once again fell to touch 5600, where it completed the double bottom. When an O exceeds a double bottom by one box it gives a sell signal. In our case the Nifty gave a sell signal at 5550. It also made a double bottom at 5600.
However, this sell signal did not last long and the markets reversed once again and made a new high at 6100. This correction could have been used by market participants to enter the market as the market was consistently making higher tops and higher bottoms which is a bullish sign.
Hope this is clear to all of you. For your assignment and practice at home try to read more charts showing double bottom and sell signals.
Please do give your feed back so that i can help you in clearing your doubts or improve my presentation.