Chart Patterns: Double-Top


The principles discussed in last month’s articles on chart patterns, the overview and the head and shoulders, underlie reversal chart patterns in general. They apply to this article’s topic as well: the double-top reversal pattern

Perhaps the most common mistake when identifying patterns is neglecting to consider the preceding trend. This is akin to neglecting the context. To emphasize an important point made in the overview article: 

“Chart patterns are divided into two main groups: reversal patterns which occur at the end of a trend, or continuation patterns which reside within the trend. It logically follows then that a prerequisite to any chart pattern is the existence of a prior trend.” 

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Absolute Equity Valuation, Part III: Gordon Growth Model

Myron J. Gordon

Myron J. Gordon 1920 - 2010


In part-2 of this series we applied the concept of the present value of all future cash flows in the form of the dividend discount model. A variation of this is called the Gordon Growth Model 1 which deals with the infinite summation problem more directly.  

The Gordon Growth Model (GGM):  

The summation in the present value model is an infinite geometric series. It can be mathematically transformed 2 into what is known as the Gordon Growth Model, or GGM for short. Although cash flow can be represented by several measures, let’s use dividends for illustration purposes.  

Gordon Growth Model, formula 1

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CFA Study Tips

CFA L3 Volume 5A frequently asked question in discussion groups relates to how to study for the CFA. Having taken all three levels, I would like to share my perspective.

I enjoy learning, and I don’t mind taking the time I need to understand the material. A bowl of gourmet ice cream is to be enjoyed before it melts, but slowly enough to avoid brain freeze.

When I study for the CFA exam, my objectives are to: Read more »

Absolute Equity Valuation, Part II: Dividend Discount Model


In part-1 of this series, we discussed the concept that a stock’s intrinsic value is the present value of its cash flows. Here in part-2 we will introduce the general form of the present value model, and discuss the dividend discount model in more detail. 

The present value model discounts all future cash flows to determine a stock’s present value, V0, which is its intrinsic value at t=0. Discounting all future cash flows necessitates using the infinity sign (∞) in the summation. The foundational formula for the present value model is: Read more »

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