Double Top
Key Takeaways
- 01.Two peaks at a similar price level, separated by an intervening trough (the neckline).
- 02.It signals that buyers failed twice to push price higher, indicating a shift in momentum to sellers.
- 03.Confirmation occurs on a close below the neckline support.
- 04.The price target is calculated by projecting the pattern's height downward from the neckline.
Why it matters
Double tops indicate strong overhead supply. When the neckline breaks, it triggers stops for long positions and attracts short sellers, accelerating the downward trend. It provides clean risk management parameters with invalidation just above the peaks.
When it matters
It is most significant at the end of a long-term uptrend or near major historical resistance. Finding this pattern in a flat market carries very little value.
Two peaks at a shared resistance level with an intervening trough; the neckline drawn across the trough acts as breakdown confirmation.
Draw the neckline across the intermediate low on your chart to find the breakdown confirmation level.
Common Mistakes
Selling at the second peak
Entering a short position at the second peak before confirmation is highly risky, as price can easily consolidate and break higher.
Ignoring volume trends
A valid double top typically shows lower volume on the second peak than the first. A volume spike on the second peak can indicate a breakout attempt rather than a reversal.
📖 Real-World Example: A major index topping out
During the market peaks of late 2021, several major indices and large-cap tech stocks formed double tops, peaking in late summer, falling to a midline, retesting the peaks in late autumn on lower volume, and subsequently breaking down below the neckline to trigger a bear market.