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Double Top Chart Pattern Analysis | Double Top Pattern with Example

Double Top Chart Pattern Analysis with Example. A double top is called a bearish reversal trading pattern. The Double Top pattern is consists of two peaks above a support level called the neckline. Here the first peak will come after a strong bullish trend and retrace to the neckline. After hitting the level momentum will shift towards bullish to form the second peak. Then it will confirm that the pattern trend must retrace after the initial retracement of the first peak. The breakouts can occur on both the upside and downside. So if you enter a breakout of a double top chart pattern, you will want to keep a close stop above/below the support and resistance level. In this pattern, the market made an extended move high but gets rejected by resistance called the first top.

Then the market is pulled back to support and retested the same resistance level called a second top. The price momentum breaks through the neckline level of support, and the bearish trend will continue for a long period of time. Traders who use this in their market activity will open a short position at the height of the second peak in anticipation of the bearish reversal. It represented by the red arrow below. A double top as you have to open a short position on a double top. Before confirming the signal with technical indicators as RSI of momentum indicators take a position on double tops with a CFD. The financial products are the derivatives to enable and go towards the long or short underlying market. You can use CFDs and spread bets to open a short position after the second peak. Some steps to follow are Decide what you want to trade CFDs or spread bets, then research the markets you can trade, also learn how to identify double tops, then Practice trading with an IG demo account and Create a live account when you’re ready to trade the live market.

Attributes

This indicator leads to fake out the reversal trends. The variation occurs in the classic double top pattern mark a change in trend from bullish to bearish. There is the potential for many double top patterns to form an overall chart. Until the key level of support is broken reversal pattern cannot be confirmed and not be acted on. We should avoid pulling the trigger on trade early. So investors should wait for the support level to be broken before jumping in. It is not common for a price filter to be applied to differentiate between confirmed and false support breaks.

Pattern type :It is Reversal

Indication : It is Bearish

Breakout Confirmation : Confirmation for this pattern is when there is a close below the lower trend line it draws horizontally across the intervening low between the high with above-average volume.

Measuring : Here take the distance between the two high in the low, and subtract it from the breakout level.

Volume : The volume will decline during the formation and expanding on the breakout.

Conclusion

A double top reversal pattern occurs after a failed move to the upside. The signal is unable to break through the upper resistance level. So when the pattern occurs the traders should refrain from taking a long position. The focus should then be put on finding a bearish entry point. To learn more about stock chart pattern and how to take advantage of technical analysis to the fullest should be sure to check our entire library of the predictable chart pattern. The double top pattern has two swings high close to the price. It is seen in all time-frames. Here two peaks should be near equal in price. It should be at equal distance in terms of time between highs. And volume decreases on the second to double tops have a large amount of cause potential as the price of the stock has moved back in forth within a defined range. When the stock breaks out there is an expansion in volume and price movement.