The Double Top and Bottom Chart Pattern

The double top chart pattern is a bearish reversal pattern typically found on bar charts, line charts, and candlestick charts.

As its name implies, the pattern is made up of two consecutive peaks that are roughly at the same level and a moderate trough in between.

Look at an illustration in the image below:

Double Top vs Double Bottom

Double Top	Double Bottom
It can only be confirmed after an uptrend	It can only be confirmed after a downtrend
Have two consecutive peaks (M shape)	Have two consecutive troughs (W shape)
Price hits the same resistance level twice	Price hits the same support level twice
Breakout point leads to the downtrend	Breakout point leads to the uptrend
Breakout below the support level confirms the pattern	Breakout below the resistance level confirms the pattern

double-top-chart-pattern

As you can see from the illustration, this price action pattern involves the formation of two swing highs that end at a critical resistance level.

The idea that the market was rejected from this level not once, but twice, is an indication that the level is likely to hold.

How to Identify a Double Top Pattern

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For a double top pattern to be valid, it must meet the following criteria:

• An uptrend or an extended upswing.

• The first peak forms a resistance level.

• The second peak is rejected from the resistance level.

• The price breaks below the neckline, which is a support level.

Let me give you a real chart example just to show you the necessary elements we need to identify a valid double top chart pattern.

See the AUD/USD H1 chart below:

As you can see, the market made an extended upswing but was quickly rejected at a resistance level, forming the first top.

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trading-with-double-tops

The Double Top Chart Pattern

The double top chart pattern is a bearish reversal pattern typically found on bar charts, line charts, and candlestick charts.

As its name implies, the pattern is made up of two consecutive peaks that are roughly at the same level and a moderate trough in between.

Look at an illustration in the image below:

double-top-chart-pattern

As you can see from the illustration, this price action pattern involves the formation of two swing highs that end at a critical resistance level.

The idea that the market was rejected from this level not once, but twice, is an indication that the level is likely to hold.

How to Identify a Double Top Pattern

​

For a double top pattern to be valid, it must meet the following criteria:

An uptrend or an extended upswing.

The first peak forms a resistance level.

The second peak is rejected from the resistance level.

The price breaks below the neckline, which is a support level.

Let me give you a real chart example just to show you the necessary elements we need to identify a valid double top chart pattern.

See the AUD/USD H1 chart below:

trading-chart-pattern

As you can see, the market made an extended upswing but was quickly rejected at a resistance level, forming the first top.

The market then pulled back to a support level and subsequently rallied to retest the same resistance level. It got resisted at that level, giving rise to the second top.

So right now, we have four important elements in hand:

The extended move to the upside

The first top

The second top

The neckline (support level)

The double top pattern is confirmed, and therefore tradable, only after the market breaks below the support level (the neckline).

Let me give you another chart example below :