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A double top is a strong bearish reversal pattern. It occurs when an uptrend fails to make a higher high and instead, makes an equal (or near equal) high.
The psychology behind the pattern is that the failure to make a higher high could be an early sign that the momentum is leaving the uptrend. The equal high is an indication that the previous high is being tested and confirmed as resistance.
All this means that a reversal is likely to happen.
As you can see from the image above, two horizontal lines are drawn off the double top. The top line is the resistance line.
The second line marks the middle valley. From here on, I’ll refer to this line as the breakout line.
To get your profit target for this pattern, you measure from the resistance line to the breakout line.
Then you take that measurement (in pips if you’re trading the Forex market) and duplicate it downward as in the image above.
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