Double top

What it is

A double top is a reversal pattern at the end of an uptrend. Price rallies to a high, pulls back, rallies to roughly the same high again, and fails a second time. The low between the two peaks is the support (sometimes called the neckline). The pattern completes when price closes below it.

Why it forms

The first top is where sellers overwhelmed buyers. The pullback attracts dip-buyers who push price back up. When the second rally stalls at the same level, it shows that supply is still sitting there — and that buyers could not absorb it even with a second attempt.

If price then breaks the pullback low, the dip-buyers from the middle of the pattern are underwater. Their selling, plus fresh short sellers, adds to the move down.

How to identify it

• A clear uptrend before the first top.
• Two peaks at about the same price. A small difference is normal; they rarely match to the cent.
• A meaningful pullback between them — not just a couple of candles.
• Time between the tops. Peaks that form days or weeks apart on a daily chart carry more weight than two candles side by side.
• Volume often lighter on the second top than on the first.

What confirms it

A candle close below the support formed by the pullback low. Higher volume on that break strengthens the signal. A retest of the broken support from below, followed by rejection, is further confirmation.

What invalidates it

• Price closes above both tops — resistance has been absorbed.
• After breaking support, price quickly recovers and holds above it.

Common mistakes

• Calling it at the second top. Many “second tops” become a breakout to new highs.
• Using a tiny pullback. Without a real trough, there is no support to break.
• Ignoring the trend. A double top in the middle of a range is just a range.
• Treating the measured move as a price target. It is a reference for scale, not a forecast.