Double-Top

A bearish technical chart pattern featuring two consecutive peaks of similar height with a moderate trough in between.

A double-top is a bearish technical analysis chart pattern that signals a potential trend reversal from bullish to bearish. It consists of two consecutive price peaks that are roughly equal in height, separated by a temporary price decline known as the trough. The lowest point of this trough establishes a horizontal support level referred to as the neckline. Technical analysts observe this pattern over weeks or months on a price chart. The pattern is only considered confirmed when the asset's price breaks decisively below the neckline, ideally accompanied by an increase in trading volume. Until this breakout occurs, the pattern is unconfirmed, and the asset may continue to trade sideways or resume its upward trend. Investors and traders monitor double-tops to identify potential exit points, set stop-loss orders, or establish short positions. The failure of the second peak to break above the resistance level of the first peak indicates that buying momentum is exhausting. A common pitfall is trading the pattern too early before the neckline is broken, which can lead to losses if the price rebounds off the support level.

A stock rallies to a peak of $100, falls to a trough of $85 (establishing the neckline), rallies back to $100, and then declines again. The height of this pattern is $100 - $85 = $15. If the stock price breaks below the $85 neckline, the double-top is confirmed, projecting a potential downward target of $85 - $15 = $70.