Double top

bearish · reversal pattern · also: M-top

The double-top is a bearish reversal pattern: two consecutive peaks at approximately the same level, separated by a moderate trough. Confirmation occurs when price closes below the trough's low (the "neckline"). Volume should contract on the second peak relative to the first.

Formation rules

Prior trend is up
Two peaks within ~3% of each other
Volume on the second peak lower than the first
Confirmation: close below the intervening trough

How to trade it

Wait for a confirmed neckline break before shorting. Stop above the second peak. Measured target = height between peaks and neckline, projected below the neckline. Double tops are statistically more reliable than ad-hoc resistance trades because of the volume divergence requirement.

Common pitfalls

Strong uptrends often see triple tops before reversing
Without volume contraction the pattern is unreliable

Statistical context

Bulkowski reports double-top breakouts achieving the measured target ~73% of the time when volume confirmation is present. The confirmation requirement is doing the work.

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