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| Look for the dependable Adam & Eve topping formation on many price charts. A sharp, volatile first top characterizes the first leg of this common reversal. Volatility declines through a long, rounded second top that allows traders to carefully locate a low-risk entry point. Both the first short-term low after the sharp high and S/R from the preceding rally (gaps and congestion) point to the likely breaking point. SEEK's descending triangle illustrates one classic version of the A&E. Enter the short sale as close to horizontal bottom support as you can get. Or wait until after the breakdown and then sell into a pullback. Also look for the upside down version of this classic reversal as a double bottom variation. |
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