Introduction to Chart Patterns

Double Top

By March 17, 2016 December 1st, 2018 No Comments

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Reliable Reversal

It might seem like there isn’t much that’s certain in the stock market, but without the basic assumptions of technical analysis it would be difficult for anyone to come to a decision about whether to buy or sell a stock. Technical analysis wouldn’t be possible without the basic belief that history, even in the stock market, is destined to repeat itself. Using this principle of repetition, analysis can learn to identify and interpret certain recurring patterns and use that information to inform their decisions about the future.

The double top is a chart pattern that is well known in the trading world as a signal of an upcoming trend reversal. Of all the reversal chart patterns the double top is considered to be one of the most reliable you should add it to the group of popular charts that you can spot easily. The double top pattern is formed after a sustained upward trend and is a warning to technical analysis that the previous trend is about to reverse. If you want to spot this pattern, look for a price movement to test support or resistance levels two times without being able to break through them. When spotted, the double top tells investors that an intermediate or long-term trend reversal is to be expected.