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Double Top

Trading Term

A double top is a bearish reversal chart pattern that signals a potential change in trend from an uptrend to a downtrend. It forms after a sustained price increase and consists of two peaks (tops) at approximately the same price level, separated by a moderate decline. Visually, the pattern resembles the letter “M” on a price chart.

  • Two Highs: The stock reaches a high (first top), pulls back slightly, and then rises again to test the same resistance level (second top), failing to break through.
  • Neckline: The low point between the two tops forms a support level, often called the neckline.
  • Breakdown Confirmation: When the price breaks below the neckline after forming the second top, it confirms the pattern and suggests the beginning of a downward trend.

The double top is widely used in technical analysis to identify potential sell signals or shorting opportunities.

TWS chart of a double top pattern.

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