Double Top Pattern
The double top is a bearish reversal pattern that forms after an extended uptrend. It consists of two consecutive peaks at approximately the same price level, signaling that the uptrend may be ending.
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Key Characteristics
Trading Tips
- ✓Don't anticipate - wait for neckline break confirmation
- ✓Look for divergence on the second peak (lower RSI)
- ✓Volume typically lower on second peak
- ✓Consider partial position on break, add on retest
Signal Strength & Reliability
Double tops are more reliable when the peaks are well-defined and the breakdown has volume confirmation. Failed double tops can lead to strong continuation moves.
Double Top FAQs
Common questions about the double top pattern
There's no strict rule, but typically the peaks should be at least 2-4 weeks apart on daily charts. Too close together may just be noise; too far apart may indicate a trading range rather than a reversal pattern.
They're the same pattern - 'M pattern' is simply another name for double top because the shape resembles the letter M. Both terms describe two peaks at similar levels with a valley between them.
Trading before confirmation is riskier. Some traders enter small positions when price fails at the second peak with a stop above it. However, waiting for the neckline break provides better confirmation at the cost of some potential profit.
Related Patterns
All Chart Patterns
Disclaimer: Wyck provides technical analysis for educational purposes only. This is not financial advice. All trading involves risk. Always consult a licensed financial professional before making investment decisions.
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