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This chart focuses on Al teaching about Double Top Reversals in a bull trend and Double Top Bear Flags in a bear trend. He emphasizes that whether it's a double top reversal in a bull trend or a double top bear flag in a bear trend, the trading approach remains the same (which I've grasped).
However, I have a question:
Considering the strong bull trend context before the first set of L1, L2, why are we even considering looking to short at first set of L1 and L2 (wouldn't this be a low probability trade considering preceding bull trend?). Couldn't this just be a pullback in a bull trend, and traders might consider buying instead. Couldn't this downward movement from the first set of L1, L2 to the second set actually be a large wedge bull flag?
Al also mentions in earlier videos that if a pullback extends over 20 or more bars, the probability of the trend resuming upward is equal to the probability of it resuming downward. So, I can comprehend the idea of selling below the second set of L2s assuming couple of prior lower highs hence a bear trend.
Sudeep
Hi Sudeep,
First came the MTR setup: break of trend at (A), retest prior extreme (B), DT LH L1,L2 for 40% chance of reversal into bear trend. You're right, it's low probability, but 40% may be ok to take as long as trader sizes accordingly and plans to hold for >1:2 swing and the context is good for it (maybe this chart is near the highs of a bigger TR and the bull move was too climactic comparatively so could've been climactic exhaustion).
Either way, I think for the purposes of this slide Al just wants to show that indeed the first L1,L2 are initially low probability as that's why he called it an MTR but after extended pullback and bulls failing to resume the probability increases that more likely this is evolving into a bear trend and so the next set of L1,L2s is a flag.
Hope this helped!
CH
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