Double Top Pattern
📉 Double Top Pattern – Bearish Reversal Signal
The Double Top pattern is a classic bearish reversal formation that occurs after an uptrend. It signals that buying pressure is weakening and sellers are gaining strength.
Illustration: Double Top — two highs forming the M shape and neckline
📘 What Is the Double Top Pattern?
The Double Top is a reversal pattern shaped like the letter "M." It occurs after an uptrend and consists of two highs (tops) at approximately the same price level separated by a low (neckline). Breaking below the neckline confirms a bearish reversal.
- Occurs after a clear uptrend.
- Two highs (tops) at roughly the same level indicate strong resistance.
- The low between the highs forms the neckline.
- Break below the neckline signals a bearish trend reversal.
Example Chart: Double Top forming after an uptrend — bearish reversal signal
💡 Market Psychology
- First Top: Buyers push prices higher, but profit-taking begins. - Second Top: Buyers attempt to reach the previous high but fail, showing strong selling pressure. - Neckline Break: Confirms that sellers have taken control, and a downtrend is likely to follow.
✅ Pro Tip: Volume often increases on the breakdown below the neckline, confirming the bearish reversal.
⚙️ How to Trade Double Top
- Identify the two highs forming the "M" shape after an uptrend.
- Draw the neckline at the low between the two tops.
- Enter a sell (short) position after price closes below the neckline.
- Place a stop-loss above the second top.
- Set a target equal to the height from the tops to the neckline projected downward.
Example: Break of neckline confirms bearish trend — short entry opportunity
🏁 Conclusion
The Double Top pattern is a reliable bearish reversal indicator. Recognizing it early and confirming with volume and support levels can help traders identify strong selling opportunities.
“When the Double Top forms — the market faces resistance, and the bears take charge.”