Tower Top

The Tower Tops are major reversal patterns composed of a series of Japanese candlesticks.

Their global shape is that of a tower, hence their name. They can be observed over all time units.

A Tower Top’s characteristics are as follows:

• The Tower Top must appear after an uptrend.

• Powerful white candlesticks form the rise.

• Powerful black candlesticks form the fall.

Such a pattern appears after an uptrend, when the trend speeds up which forms one or more long white candlesticks. The trend then slows down and prices struggle to reach new highs. The bulls start to doubt, they hesitate before taking their gains and their stops become more frequent. Some contrarian traders begin to position themselves.

The falling prices attract new bears in and it triggers the bulls’ stops which in turn accelerates the new downtrend and forms long black candlesticks. Here, the reversals are reinforced by a resistance at €56 where a Shooting Star has already appeared before. The first two Tower Tops only give rise to small reversals but the 3rd one, reinforced by the previous failures, gives rise to a real downtrend.

The Tower Tops are quite similar to the Dumpling Tops and they also are major reversal patterns. The Tower Tops form rather sharp reversals whereas Dumpling Tops, that reverse more slowly, must be validated by a gap.

Positions can be taken during Tower Tops, especially if other signals such as a resistance or a double or triple top can confirm the analysis. The invalidation threshold will then be placed above the Tower Top.