Also known as "Stock Picking" or "Bottom Up Method", the Bottom Up strategy focuses on analyzing the overall health of a company in order to evaluate the potential of its stocks.
Popular with famous trading personalities such as Warren Buffet or Peter Lynch, the Bottom Up strategy - also known as "Stock Picking" or "Bottom Up Method" - implies that the investor takes the stock itself as the starting point for his analysis. In other words, in the first instance, the Bottom Up trader does not take into account the dynamics or location of the market, unlike with the Top Down strategy. Instead, they will rely on a thorough analysis of the accounting, economics and strategy supported by the company that owns the asset.
The Bottom Up strategy therefore requires a thorough knowledge of the company's current situation, its dynamics and its potential, in order to determine whether the company's value is undervalued in relation to the market. Annual reports, letters to shareholders, articles in the trade press... everything is taken into account.
It should be noted that despite the importance of the financial and fundamental analysis of the company, the decision making remains as always subjective and the part of psychology remains not negligible, beyond the objective value of a stock. The Stock Picking method requires a good knowledge of management, accounting, finance and economics. For these reasons, patience and method are a must to hope to succeed with this approach. Many traders therefore fall back on Top Down strategy or technical analysis.
A double top consists of two peaks formed in contact with resistance. This chartist pattern signals a probable reversal of an uptrend.
A chartist figure present in certain trend reversals, the Double Top is characterized by :
Chronologically, the Double Top respects 7 key steps :
Depending on the case, the Double Top pattern allows for a wider or narrower gap between the two tops. The narrower the gap, the greater the probability of a downward reversal of the trend, and therefore of validation of the Double Top. Similarly, the peaks may take the form of a peak (Adam's peak) or, on the contrary, a rounded shape (Eve's peak).