Double and Triple tops are commonly observed at the end of an uptrend and are considered a Reversal Pattern.
This pattern is easy to identify as it creates an M shape at the top of the chart. The price consolidates after a strong upward move, and upon making the second or third attempt to break through the resistance, the level is rejected.
The aggressive entry is made at the high of the second or third attempt to break the resistance level, as it may enable the trader to realise profit before the pattern's neckline. However, this pattern can fail at this point.
The conservative entry is when the price breaks out of the structure and retests the neckline.
Some key points to consider:
- The price movement cannot surpass the prior high, resulting in a Double Top pattern
- The measured move of these patterns is from the Double Top/Bottom to the neckline, which can be used to predict targets
- Look for engulfing candles or Hammers at the second peaks to assist with an aggressive entry if it aligns with your trading plan
- Entry triggers typically focus on the candles and can be traded as an SFP if a Hammer is present
Nov 28, 2024