This EUR/USD 1-hour chart presents a clear Double Top pattern, signaling a potential trend reversal. The chart displays key technical elements, including support and resistance levels, trendlines, a stop-loss placement, and a take-profit target. Let’s go through an in-depth professional breakdown of this trading setup.
1. Market Structure and Trend Analysis
Before identifying the pattern, it’s crucial to analyze the market structure:
✔ The price had been in an uptrend initially, making higher highs and higher lows.
✔ However, the trend began to weaken after hitting resistance at the 1.0950 zone.
✔ This failure to break higher created a double top, which is a strong bearish reversal signal.
A double top forms when the price reaches a high twice, fails to break above resistance, and then declines past the neckline (support level), confirming trend reversal.
2. Double Top Pattern Breakdown
🔹 First Peak (Top 1):
The price surged upwards, hitting the resistance zone at 1.0950, but faced selling pressure.
The rejection resulted in a pullback to the neckline (support level at 1.0800-1.0820).
🔹 Second Peak (Top 2):
The price attempted another rally but failed at the same resistance zone, confirming seller dominance.
The second rejection suggests a lack of bullish strength, signaling a potential shift in momentum.
🔹 Neckline (Support Breakdown):
The key support zone around 1.0800 acted as a pivot level.
Once this level was breached, it confirmed bearish continuation.
3. Key Technical Levels & Price Action Signals
🟢 Resistance Level – 1.0950 Zone
This level has acted as a strong supply zone where sellers stepped in to push prices lower. The two failed breakout attempts indicate that buyers lost control.
🔵 Support Level (Neckline) – 1.0800-1.0820 Zone
Initially, this area provided buyer support, but once broken, it became a resistance level (previous support turns into new resistance).
⚡ Stop-Loss Placement – 1.09190
A well-placed stop-loss above the resistance zone protects against false breakouts.
If the price rises above this level, it invalidates the bearish structure.
🎯 Take-Profit Target – 1.06916
The projected target aligns with the measured move (the distance from the resistance to the neckline).
The price may find support at this level, where traders should look for a potential reversal or continuation.
4. Confirmation of Bearish Breakdown
For a high-confidence short trade, multiple confluences support the bearish bias:
✔ Break & Retest of the Neckline – After breaking support, the price attempted a retest and failed, confirming resistance.
✔ Trendline Break – The trendline supporting the previous uptrend has been decisively broken.
✔ Bearish Price Action – The formation of strong red candles and lower highs suggests sustained selling pressure.
✔ Momentum Shift – Increased bearish volume further confirms the reversal strength.
5. Trading Strategy & Execution Plan
✅ Entry Criteria
Sell after the retest rejection at the previous support (now resistance).
Look for a strong bearish candle formation as a confirmation signal.
📉 Risk Management
Stop-Loss: Placed slightly above 1.09190, ensuring the pattern remains valid.
Take-Profit: Target set at 1.06916, aligning with previous structure support.
💰 Risk-Reward Ratio
The setup offers an attractive risk-to-reward ratio, making it a high-probability trade.
6. Alternative Scenarios & Market Considerations
Although the bearish bias is dominant, traders should be prepared for alternative outcomes:
🔸 Fakeout Risk: If price closes above 1.09190, it could indicate a failed breakdown, invalidating the trade.
🔸 Bounce from 1.06916: If the price reaches the target support zone, buyers might step in, leading to a potential reversal.
🔸 Fundamental Influence: News events (such as FOMC, ECB statements, or US inflation data) can increase volatility and impact price direction.
7. Conclusion – A High-Probability Short Trade
This Double Top pattern setup presents a textbook bearish reversal, offering an excellent short-selling opportunity. The combination of technical confirmations, price action signals, and a well-structured risk-reward ratio makes this trade highly reliable.
Final Takeaways:
✔ Bearish Confirmation – Double Top breakdown with a retest rejection.
✔ Sell Setup Validity – Below 1.0800 support.
✔ Stop-Loss & Target Defined – Risk-controlled strategy execution.
📊 Verdict: Bearish trade setup with downside potential toward 1.06916. Traders should monitor price action for further confirmations! 🚀
1. Market Structure and Trend Analysis
Before identifying the pattern, it’s crucial to analyze the market structure:
✔ The price had been in an uptrend initially, making higher highs and higher lows.
✔ However, the trend began to weaken after hitting resistance at the 1.0950 zone.
✔ This failure to break higher created a double top, which is a strong bearish reversal signal.
A double top forms when the price reaches a high twice, fails to break above resistance, and then declines past the neckline (support level), confirming trend reversal.
2. Double Top Pattern Breakdown
🔹 First Peak (Top 1):
The price surged upwards, hitting the resistance zone at 1.0950, but faced selling pressure.
The rejection resulted in a pullback to the neckline (support level at 1.0800-1.0820).
🔹 Second Peak (Top 2):
The price attempted another rally but failed at the same resistance zone, confirming seller dominance.
The second rejection suggests a lack of bullish strength, signaling a potential shift in momentum.
🔹 Neckline (Support Breakdown):
The key support zone around 1.0800 acted as a pivot level.
Once this level was breached, it confirmed bearish continuation.
3. Key Technical Levels & Price Action Signals
🟢 Resistance Level – 1.0950 Zone
This level has acted as a strong supply zone where sellers stepped in to push prices lower. The two failed breakout attempts indicate that buyers lost control.
🔵 Support Level (Neckline) – 1.0800-1.0820 Zone
Initially, this area provided buyer support, but once broken, it became a resistance level (previous support turns into new resistance).
⚡ Stop-Loss Placement – 1.09190
A well-placed stop-loss above the resistance zone protects against false breakouts.
If the price rises above this level, it invalidates the bearish structure.
🎯 Take-Profit Target – 1.06916
The projected target aligns with the measured move (the distance from the resistance to the neckline).
The price may find support at this level, where traders should look for a potential reversal or continuation.
4. Confirmation of Bearish Breakdown
For a high-confidence short trade, multiple confluences support the bearish bias:
✔ Break & Retest of the Neckline – After breaking support, the price attempted a retest and failed, confirming resistance.
✔ Trendline Break – The trendline supporting the previous uptrend has been decisively broken.
✔ Bearish Price Action – The formation of strong red candles and lower highs suggests sustained selling pressure.
✔ Momentum Shift – Increased bearish volume further confirms the reversal strength.
5. Trading Strategy & Execution Plan
✅ Entry Criteria
Sell after the retest rejection at the previous support (now resistance).
Look for a strong bearish candle formation as a confirmation signal.
📉 Risk Management
Stop-Loss: Placed slightly above 1.09190, ensuring the pattern remains valid.
Take-Profit: Target set at 1.06916, aligning with previous structure support.
💰 Risk-Reward Ratio
The setup offers an attractive risk-to-reward ratio, making it a high-probability trade.
6. Alternative Scenarios & Market Considerations
Although the bearish bias is dominant, traders should be prepared for alternative outcomes:
🔸 Fakeout Risk: If price closes above 1.09190, it could indicate a failed breakdown, invalidating the trade.
🔸 Bounce from 1.06916: If the price reaches the target support zone, buyers might step in, leading to a potential reversal.
🔸 Fundamental Influence: News events (such as FOMC, ECB statements, or US inflation data) can increase volatility and impact price direction.
7. Conclusion – A High-Probability Short Trade
This Double Top pattern setup presents a textbook bearish reversal, offering an excellent short-selling opportunity. The combination of technical confirmations, price action signals, and a well-structured risk-reward ratio makes this trade highly reliable.
Final Takeaways:
✔ Bearish Confirmation – Double Top breakdown with a retest rejection.
✔ Sell Setup Validity – Below 1.0800 support.
✔ Stop-Loss & Target Defined – Risk-controlled strategy execution.
📊 Verdict: Bearish trade setup with downside potential toward 1.06916. Traders should monitor price action for further confirmations! 🚀
Related publications
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.
Related publications
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.