Reversal Metals Trading Patterns

These patterns are formed after the metal market has had an extended move up or down and the metals price reaches a strong resistance or support respectively.

When metals price reaches such a point it starts to form a pattern. Since these formations are frequently formed it is easy to spot them once you learn how and start using them. There are four types:

• Double Tops
• Double Bottoms
• Head & shoulders
• Reverse Head & shoulders

This learn metals trading tutorial will only cover double tops and bottoms, for the other 2, read this other tutorial: head & shoulders and reverse head & shoulders

Double Tops

This is a reversal metals trading pattern which forms after an extended upward metal trend. As its name implies, this pattern is made up of 2 consecutive peaks which are roughly equal, with a moderate trough between.

This formation is considered complete once metals price makes second peak and then penetrates lowest point between the highs, called the neckline. The sell metals signal from this formation occurs when the metal market breaks-out below neckline.

In Metals, this formation is used as a early warning trading signal that a bullish metals trend is about to reverse. However, it is only confirmed once the neckline is broken and the metal market moves below the neckline. Neckline is just another name for last support level formed on the Metals chart.

Summary:

• Forms after an extended move upward
• This formation indicates that there will be a reversal in the metal market
• We sell when metals price breaks below the neckline point: see below for explanation.

The double tops look like an M Shape, the best reversal metals signal is where the second top is lower than the first one as shown below, this means that the reversal can be confirmed by drawing a downwards metals trend line as shown below. If a trader opens a sell metals signal the stop loss will be placed just above this downward metals trend line.

M-Shaped

Double Bottoms

This is a reversal metals trading pattern which forms after an extended downward metal trend. It is made up of two consecutive troughs which are roughly equal, with a moderate peak between.

This formation is considered complete once metals price makes second low and then penetrates highest point between the lows, called the neckline. The buy indication from this bottoming out signal occurs when the metal market breaks-out the neck line to the upside.

In Metals, this formation is an early warning signal that the bearish metals trend is about to reverse. It's only considered complete/confirmed once the neckline is broken. In this formation the neckline is the resistance level for the metals price. Once this resistance is broken the metal market will move up.

Summary:

• Forms after an extended move downwards
• This formation indicates that there will be a reversal in the metal market
• We buy when metals price breaks above the neckline point: see below for explanation.

The double bottoms pattern look like a W-Shape, the best reversal metals trading signal is where the second bottoms is higher than the first one as displayed below, this means that the reversal can be confirmed by drawing an upward metals trend line as shown below. If a trader opens a buy metals signal the stop loss will be placed just below this upward metals trend line.

W-Shaped