Double Top
A reversal pattern that forms at the end of an uptrend, when price makes two peaks at roughly the same level. It completes when price falls below the neckline drawn through the trough between the peaks. It can signal that price failed to clear the same level twice and that the uptrend is losing strength.
How it forms
- Prior uptrend. The pattern is a reversal signal. It needs a clear uptrend before it.
- First peak. Price makes a new high, then pulls back clearly to a trough.
- The trough between. The pullback is a visible move, not a small wobble. A figure often quoted for daily charts is a drop of about 10% or more from the peak. On lower timeframes it can be smaller.
- Second peak. Price rises again and stalls near the first peak. The two peaks are usually within about 3% of each other. They are separated by a clear stretch of time, not just a few candles.
- Neckline. A horizontal line through the lowest point of the trough between the peaks.
- Completion. The pattern is complete when price closes below the neckline. Until then, two peaks are only a possibility.
The figures are approximate. They are commonly accepted textbook values, not hard limits.
What it suggests
At the first peak, sellers push price back. On the second attempt, price reaches the same level but cannot get past it. This can show that selling pressure is still there and that buyers lack the strength for a new high. A break of the trough suggests that buyers' last line of defence has been lost.
In an uptrend, price often returns to a previous high and pauses. That alone is not a double top. The pattern only means something once the neckline breaks. Before that, price can rise above the peaks and the uptrend can carry on.
When it strengthens, when it weakens
Strengthens
- Both peaks forming in the same resistance zone
- Lower volume on the second peak than on the first
- Volume rising as the neckline breaks
- A clear gap in time and a deep pullback between the peaks
- Forming on a higher timeframe (4H, 1D)
Weakens
- No clear uptrend before the pattern
- Peaks forming very close together in time
- A very shallow trough between the peaks
- The break coming on low volume
- A strong support zone just below the neckline
The MarketLevelMap view
How it relates to zones
A double top is a zone pattern by nature: price comes to the same area twice and turns back twice. Its link to zones is read in three places:
- If both peaks fall in a resistance zone, the pattern shows that zone being defended a second time. The peaks need not be at exactly the same price; it is enough that both sit inside the same zone.
- If the trough lines up with a support zone, a break of the neckline also means that zone is lost. This gives the break more weight.
- The first support zone below the break is a more realistic reference than the measured move for where price may react again.
After the break, price sometimes returns to retest the neckline from below. The zone that was support may now act as resistance. If price closes back above the neckline in this test and holds there, the break is considered to have weakened.
When it completes
Close below the neckline (the trough between the peaks).
When it is invalidated
Before completion: If price closes above both peaks without breaking the neckline, the pattern is considered not to have formed. The peaks then become a level that has been cleared, not resistance.
After completion: Even after a close below the neckline, if price climbs back above it and closes above the second peak, the bearish scenario is considered invalid.
Often confused with
- Head and ShouldersThere is a higher middle peak (the head) with a shoulder on each side.
- Triple TopThree peaks form at the same level instead of two.
- RectanglePrice moves between two flat levels, and the direction of the break is not known in advance.
For general information only. Not investment advice.Last updated: