Double Top Pattern: What It Is and How to Recognize It
The price hit the same level twice and couldn't break through. That may be a double top. Here's how to recognize it and when the pattern is actually confirmed.
What it looks like
A double top (the letter "M") is a reversal pattern after a rally. The price makes a high, pulls back, rises again to roughly the same level, and turns down once more. The low between the peaks is the confirmation line.
The mirror pattern is the double bottom (the letter "W"): after a decline, the price bounces twice off the same support level.
When the pattern is confirmed
Only after a candle closes below the low between the peaks. Until then, the two peaks are just a resistance level, and the price may break through it to the upside.
Target and stop
| How it's calculated | Example | |
|---|---|---|
| Peaks | — | ≈ $50 |
| Confirmation line | The low between the peaks | $45 |
| Height | Peak minus the line | $5 |
| Target | Line minus height | $40 |
| Stop-loss | Above the peaks | ≈ $51 |
Signs of a strong pattern
- The peaks are spread out in time: at least a few weeks apart on the daily chart.
- Volume on the second peak is lower: buyers are weakening.
- RSI divergence on the second peak.
- Rising volume on the break of the confirmation line.
The head and shoulders pattern follows similar logic. More on patterns in the lesson candlesticks and chart patterns.
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- A double top is two peaks at the same level after a rally.
- Confirmation is a break of the low between them.
- The stop-loss goes above the peaks; the target is the pattern's height.
Frequently Asked Questions
How is a double top different from a sideways market?
A sideways market is a long range with many touches. A double top is a reversal after a rally, with two clear peaks followed by a break downward.
Do the peaks have to be at exactly the same level?
No, a small difference is fine. If the second peak is noticeably higher, it may be a continuation of the rally rather than the pattern.
Is there a triple top?
Yes, the logic is the same: three attempts to break a level. Confirmation is a break of the lows between the peaks.
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