Chart patterns
Lesson 25 of 39 in the course “Crypto”. Free, with animations and a quiz.
A pattern is a repeating shape price draws on the chart. Double top: price hit the same high twice and failed to break it. The neckline is the low between the two peaks. As long as the neckline holds, the pattern has not triggered.
A candle closed below the neckline: the pattern triggered. It signals that buyers ran out of steam and a drop may start. Before the neckline broke, it was just two peaks.
Target by the measured-move rule: take the pattern height (peaks to neckline) and project it down from the neckline. For example: peaks at $110, neckline at $100, height $10, target $100 − $10 = $90. A guide, not a promise.
Check yourself
- A double top is...
Correct answer: Two failed attempts to break a high. Price failed twice to go higher. It is a reversal pattern: after the neckline breaks, a drop often follows. - What is the neckline in a double top?
Correct answer: The low between the two peaks. The neckline runs through the low between the peaks. Breaking it downward triggers the pattern. - How is the pattern target measured?
Correct answer: Project the pattern height from the break. That is the measured-move rule: the height from peaks to neckline, projected down from the neckline. A guide, not a guarantee.