Double Top Pattern
Learn to recognize and trade a double top pattern through interactive charts.
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What is a double top pattern?
A double top is a bearish pattern, which foreshadows either a medium- or a long-term trend reversal. However, you’ll need to wait for the pattern to prove itself before going short.
- Zoom (ZM) Double Top stocks
- Netflix (NFLX) Double Top stocks
- Target (TGT) Double Top stocks
- US Home Construction ETF (ITB) Double Top stocks
- EURUSD Double Top forex
- AUDUSD Double Top forex
Double top duration
The peaks are usually separated by 1 to 3 months, but can take longer.
Double top characteristics
This pattern consists of two evenly-sized peaks, separated by a trough.
- A double top requires a strong prior uptrend.
- The first peak should mark the highest point in the current trend.
- The first peak is followed by a trough. The depth of the trough usually varies between 10 and 20%. However, volatile securities like penny stocks or crypto-currencies may experience deeper troughs.
- The second peak should be roughly in line with the first. However, it may be a little higher or lower depending on general market conditions and the asset itself.
A double top has no volume requirements.
Double top trading tips
Wait for the price to fall below the neckline formed by the peaks to confirm the pattern and the trend reversal. Until this happens, the pattern is akin to a rectangle.
Some investors wait for the neckline to act as resistance, rather than support, before opening a short position. You may want to wait a week for support to break decisively, rather than a day or two.
The break below support should happen on rising volumes and show an accelerated move downwards.
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