In today’s lesson, we are going to demonstrate an example of a chart producing a double top and offering entry. The breakout does not look that promising though. However, the price heads towards the breakout direction and makes a long bearish move. Let us get started.
The chart shows that the price has a rejection at a level and makes a bearish move. Upon finding its support, it produces a bullish engulfing candle and heads towards the North. The chart produces a bearish inside bar around the level of double top resistance. It may attract the sellers to keep their eyes on the chart to go short upon a neckline breakout.
The price heads towards the South with good bearish momentum. The last candle comes out as a bullish inside bar. It is a sign that the chart may get choppy instead of making a breakout at the neckline. However, we never know. The sellers may keep patience and wait for a bearish breakout.
The price consolidates for a while and makes a bearish move. The last candle closes below the neckline. It is a kind of breakout that the sellers are waiting for, but it is a breakout. Let us wait and see what the price does here.
The chart produces a spinning top. The candle closes within the breakout level. Thus, it is a valid breakout. The sellers may wait for the chart to produce a bearish engulfing candle closing well below the last swing low. Let us proceed to the next chart.
Look at the last candle. The candle comes out as a bearish engulfing candle closing well below the last swing low. The sellers may trigger a short entry right after the last candle closes by setting stop-loss above the breakout level and take profit with 1R.
The price heads towards the South with excellent bearish momentum. It hits the target of 1R in a hurry too. This means the trade setup has worked for the sellers nicely. Considering the breakout factor, the trade setup is not an A+ trade setup. However, we may consider two important factors here.
- Double Top
- The signal candle.
These two factors are significant to make the price move. Yes, when an A+ momentum breakout goes with two of them, it gives us more chances to make a profit out of the trade. Today’s example shows that as long as it’s a breakout, upon the breakout confirmation, the price may head towards the trend direction with good momentum if the mentioned two factors meet all the requirements.