Tops & Bottoms
The Top and Bottom formations will trigger whenever price returns to a prior high or low, assuming it meets the requirements specified in the parameters. The Top/Bottom formations you are probably most familiar with are the Double Top and Double Bottom which usually appear at the end of a sustained trend, and marketDirection Monitor will find those if/when they develop. But it will also find matching tops/bottoms outside of a strong uptrend or downtrend and, as with any situation where price reaches a prior support/resistance level, these can be very actionable events. Matching bottoms are given a bullish bias by marketDirection Monitor and matching tops are given a bearish bias, but many times the direction they will take is difficult to predict so you can just wait for the move to make itself clear.
 Matching Top |
 Matching Bottom |
In the examples above, the highlighted region (red rectangle) indicates the area in which we expect the reaction. If the Top or Bottom formation comes at the end of a long and strong trend then we fully expect the formation to resolve in the direction of the bias. For smaller formations, or those not preceded by a trend, you should be prepared for a reaction in either direction.
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Note: If you would like to actually see the inflection point zones drawn in the price pane as in our examples above, then see the Chart Zone Tool section. |
Alerts
A current (i.e., Age = 1) Top formation, by default, will generate an alert condition whenever price moves past the low of the bar that completes the formation. An Aged (i.e., Age > 1) Top formation will generate an alert condition when price moves past the original alert condition low AND current bar low has exceeded prior bar low.
A current (i.e., Age = 1) Bottom formation, by default, will generate an alert condition whenever price moves past the high of the bar that completes the formation. An Aged (i.e., Age > 1) Bottom formation will generate an alert condition when price moves past the original alert condition high AND current bar high has exceeded prior bar high.
You can also use the two Alert Padding parameters to delay the alert condition until a more significant move has taken place. See the Alert Padding section for details.
This alert condition will show up immediately in the watchlist component (i.e., ♫ in the Status column). If pop-up and/or audible alerts are turned on then those will be generated as well. Email alerts are also available, but only in the chart component. See Settings for more information on the alert-related parameters.
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Note: If a solid black circle (●) is displayed in the Status column in the watchlist along with the alert condition (♫) this indicates that price has both reached the inflection point is trading at volume that is above the average volume for the security. This might indicate that price is moving rapidly in the desired direction. |
Parameters
The parameters that can be adjusted for the Top/Bottom formation are:
•Minimum Rank for Display
•Maximum Age
•Minimum Top/Bot Width
•Maximum Top/Bot Width
•Min Top/Bot Depth
•Bars for Slope Check
•Alert Padding - Type
•Alert Padding - Factor
See the Settings section for more detail on these parameters.
