When a stock fails to exceed its prior peak and starts to weaken, caution flags are being waved. What the analyst then has is a possible double top in its earliest stages. A double top is nothing more than a price chart with tow prominent peaks at about the same price level.
Why just possible? You don't know for sure if that pullback is the start of a double top or just a natural hesitation at prior resistance level. Prices will often do nothing more than trade sideways for a while between the prior peak and the prior trough before finally resuming the uptrend. For an actual double top to be present, some thing else has to happen--the price also has to fall enough to close below its previous trough around 11.10. If that happens, you have confidence the short-term trend has changed to down.
Hope this helps...
Regards,
frenchee
#board-4258 TSP Trend Timing: EFA (I), TLT (F), SPY (C), and VXF (S)
