Free Trading School · Level 8: Chart Patterns
Double tops and double bottoms
A double top forms when price rallies to a level, pulls back, rallies to the same level again and fails. The low between the two peaks is the neckline. The pattern is confirmed only when price closes below the neckline. A double bottom is the mirror image at the end of a downtrend.
A double top. Two failed attempts at the same high, then a break of the neckline.
- The second peak often comes with weaker momentum (lower RSI): a clue that buyers are tiring.
- Target: the height of the pattern projected below the neckline.
- Many traders wait for a retest of the broken neckline from below to enter with a tighter stop.
Two touches of resistance in an uptrend is just resistance until the neckline breaks. Shorting the second top early is a classic way to get run over.
No neckline break, no double top.
Quick answers
A double top forms when price rallies to a level, pulls back, rallies to the same level again and fails. The low between the two peaks is the neckline. The pattern is confirmed only when price closes below the neckline. A double bottom is the mirror image at the end of a downtrend.
No neckline break, no double top.
The length of the pole added to the breakout. The pole's length is projected from the breakout point.
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