Recognize reversal candidates
A double top has two comparable peaks separated by a trough; a double bottom reverses that arrangement. A head-and-shoulders top has three peaks with the middle highest and a neckline reference through the intervening troughs. The inverse formation flips the geometry.
Imagine peaks of $80 and $81 with an intervening trough at $74. Until later observations are known, a double-top candidate could still resolve upward, sideways or down. A rule requiring a close below the trough is not satisfied just because two peaks resemble one another.
Recognize consolidation shapes
A triangle compresses selected swing boundaries; a flag is a shorter consolidation following a sharper move. Ascending, descending and symmetrical triangles organize different boundary slopes. These labels describe geometry; they do not force a breakout in the direction suggested by the name.
An original exercise has highs near $60 and rising lows of $52, $55 and $57. That resembles an ascending triangle. A later close below the lower boundary would contradict a simple upward-continuation interpretation. Excluding such histories because they failed would bias any evaluation.
A measured target is an assumption
Some chart methods project a formation’s height from its boundary. This is a construction rule, not a promised destination or a probability estimate. State the anchors and direction before calculating, and distinguish a hypothetical projection from an investment recommendation.
For the fictional double top, a chosen height of $80 minus $74 equals $6. Subtracting $6 from a hypothetical $74 downside boundary produces $68. The arithmetic is correct under those choices. It says nothing about whether price reaches $68, in what time or with what intervening losses.
Use drawings that could exist at the time
Specify allowable differences between peaks, swing-identification rules, duration and completion criteria. A pattern drawn with knowledge of later highs and lows may use information unavailable at the purported decision date. Historical resemblance alone cannot establish a trading edge.
Practice by covering the right side of a fictional chart and writing two plausible outcomes. Keep the annotations when new bars are revealed. An understandable lesson shows both a familiar formation and how the same initial arrangement can fail, drift or be interpreted differently under another reasonable rule.
A projected target is $68 using a formation-height rule. Is $68 a verified future price?
Show the explanation
No. It is a conditional projection from selected anchors. Reaching it, the time required and the path taken all remain uncertain.
Sources and editorial notes
Original explanations and hypothetical examples prepared with AI assistance. Primary references checked October 16, 2026. Numerical examples are hypothetical unless explicitly identified otherwise.
- Fidelity: Identifying Chart Patterns with Technical Analysis
Common swing formations, double tops/bottoms, head-and-shoulders, triangles, flags and body engulfing. Only pattern construction is used; no source performance percentages, price targets or trading advice are adopted.