The V top is a reverse V-shaped top thus the name. The top is quite sharp. It’s due to the irrationality of actors leading to a steep increase that will be corrected shortly afterwards. The V top will occur most often in an upward trend and will often signal a trend reversal. It can also appear in a downward trend, like when in an economic announcement.
The neckline of the pattern is formulated by the lowest point before the formation of the reverse V.
Here is a graphical representation of a V top:
The general objective of the V Top pattern is the distance between the neckline and the lowest of the reverse V that extended to the neckline.
Various criteria is used to identify a V top:
– The highest point of the reverse V is often formulated by a single candle, often with a long upper shadow that underlines the reversal willingness of investors.
– The sharp upward movement that forms the reverse V is led by a steep upward slant. The price will make any pause during the bullish movement.
– The angle of the line that leads the bearish reversal should be similar to the angle of the line that led the bullish downtrend.
– It is quite difficult to anticipate a V top.
– The interest of the pattern is in its reversal potential.
– The V top will often appear in a channel.