The Double Top is one of the most well-known bearish reversal patterns in technical analysis. It signals a potential trend change from bullish to bearish and can provide traders with strong shorting opportunities when confirmed.
How It Works:
1- Formation: The price reaches a resistance level twice, failing to break higher, creating two peaks at a similar level.
2- Neckline Break: After the second peak, the price falls to the previous support level (neckline). If this level is broken, it confirms the pattern.
3- Bearish Confirmation: A breakdown below the neckline often leads to a strong downward move, as buyers lose control and selling pressure increases.
Key Trading Strategy:
✅ Entry: Enter a short position once the neckline support is broken.
✅ Stop Loss: Set above the second peak to minimize risk.
✅ Profit Target: The expected price drop is usually the same distance as the height of the pattern (from peak to neckline).
In the chart above, we can see a clear Double Top formation in the NASDAQ 100. After failing twice at resistance, the price broke support, confirming a bearish trend reversal.
How It Works:
1- Formation: The price reaches a resistance level twice, failing to break higher, creating two peaks at a similar level.
2- Neckline Break: After the second peak, the price falls to the previous support level (neckline). If this level is broken, it confirms the pattern.
3- Bearish Confirmation: A breakdown below the neckline often leads to a strong downward move, as buyers lose control and selling pressure increases.
Key Trading Strategy:
✅ Entry: Enter a short position once the neckline support is broken.
✅ Stop Loss: Set above the second peak to minimize risk.
✅ Profit Target: The expected price drop is usually the same distance as the height of the pattern (from peak to neckline).
In the chart above, we can see a clear Double Top formation in the NASDAQ 100. After failing twice at resistance, the price broke support, confirming a bearish trend reversal.
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.