1. Neckline Break Without Volume
- Real patterns usually break the neckline with strong volume (shows conviction).
- Fake patterns break the neckline but on low volume, and price quickly snaps back.
Rule: Always confirm with volume. If volume is weak, the move is suspicious.
2. No Retest or Failed Retest
- Clean breakouts/breakdowns often come back to retest the neckline (support turns to resistance in M tops, resistance turns to support in W bottoms).
- If price breaks but fails the retest (snaps back above/below), it’s often a trap.
Rule: Wait for a successful retest before entering if you want safer trades.
3. Shallow Second Peak/Trough
- In an M top, the second peak should reach near the first peak. If it’s much lower, it could be just a lower high in a normal downtrend (not a proper M).
- In a W bottom, the second trough should be near the first. If it’s much higher, it could just be a higher low in a trend continuation.
Rule: The pattern only counts if the two peaks/troughs are roughly at the same level.
4. Forming in the Wrong Context
- An M top is most reliable after a strong uptrend (sign of exhaustion).
- A W bottom is most reliable after a strong downtrend (sign of capitulation).
- If you see an M/W in the middle of a sideways chop, it’s often a false signal.
Rule: The bigger the prior trend, the stronger the reversal.
5. Indicators Disagree
Divergence check:
- M Top: If price makes a double top but RSI/MACD still shows strength, the pattern may fail.
- W Bottom: If price makes a double bottom but momentum indicators still point down, reversal may fail.
Rule: Confirm with at least one momentum indicator.
Summary:
- Watch volume and context.
- Be patient for confirmation and retest.
- Use indicators to double-check.