[Summary]
A double top is a chart pattern in which the price makes two similar highs and then declines.
It is known as a typical example of ceiling formation, and is a warning sign of the end of an uptrend. It will be interesting to see if the momentum slows down after the second high.
What is a double top?
A double top is when a stock price hits a high, then falls, rises to the same level again, and then falls back.
It is also called the M top because it looks like the letter M.
neckline is important
In a double top, the low price between the two peaks is called the neckline.
If the price breaks below this neckline, it will be easily recognized as a sign of a downward turn. Just hitting the high twice doesn't mean the ceiling is confirmed yet.
Points to see
- Are the two highs close to each other?
- Is the momentum weak due to the second rise?
- Did it fall below the neckline?
- Is trading volume increasing?
Summary
The double top is a basic pattern for reading the weight of the top price and the formation of a ceiling.
Don't decide it's finished until you've cracked the neckline, check it out before making a decision. Even if it looks like an M-shape, it may rise again without breaking.