Double-Top Pattern on Daily.
Double-top pattern signals price exhaustion, when you see this pattern develops it signals exit for long positions and short entry for short trades.
GoPro first high at 11.73 pulled back to 10.61 or -9.5%, then rallies back to 11.89 (16 cents higher than 11.73) creating a double top pattern. This set-up is treacherous, why? Because of the second (11.89) high was higher than the first (11.73) by 16 cents, creating a higher high. Traders may perceive it as pass through the resistance or breakout level merely because of the 16 cents higher from previous resistance. From the second high (11.89 -9.03) Gopro corrected -24%, more than double than the first pullback of 9.5% (11.73 to 10.61).
Tesla exhibited double top on daily but with a longer base, 4 months from the first high. First high of 386.99 (left side chart) pull back to 303 or -21% from high. Second high at 389.61 to 331 or -15% from high, then rallies to 363, creating a lower high that signals further selling as it validates the doubletop. 389-292 is -25% correction from high. Tesla is more on a slow drift sell compared to Gopro.
It is vital that you can establish your pivot level support, so you have leeway of when that price mark holds you can cover your short trade, of if it breaks, it conform your trade thesis and you can add more short position. See chart annotaion* When double top pattern happens in real time, mark the momentum support level for conformity, also be flexible and not be so exact by the dot, like the 11.73 and 11.89 for GoPro, 386-389 for Tesla.. As you can see on both charts, price level has toy by average of 1.3% difference from first to second high. The median average of double top correction is -15% from high. For GoPro and Tesla mean average at 24%. The technical chart set-up here is in daily time frame with a long base, best for swing trade.
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