We're seeing the exact same setup in shares of UK-based education publisher Pearson ( PSO), just in the shorter term. Pearson is showing a double-top of its own right now, with support at $20.75. If $20.75 gets taken out, it's time to be a seller in PSO.
Whenever you're looking at any technical price pattern, it's critical to think in terms of buyers and sellers. Triangles and double tops are a good quick way to explain what's going on in a stock, but they're not the reason it's tradable. Instead, it all comes down to supply and demand for shares.That support level at $20.75 is a price where there had been an excess of demand of shares; in other words, it's a place where buyers were more eager to step in and buy shares at a lower price than sellers were to sell. That's what makes a breakdown below $20.75 so significant. The move would indicate that sellers are finally strong enough to absorb all of the excess demand above that price level. Wait for that trigger before you sell. There's an abundance of gaps on Pearson's chart. Those gaps, called suspension gaps, are the result of off-hours trading on the London Stock Exchange. The gaps can be ignored from a technical standpoint.