Double Top
Double top is a technical analysis charting pattern that describes the behavior of a security’s price. It is characterized by two consecutive peaks that form a “M” shape. The double top pattern is considered a bearish reversal pattern, meaning that it signals that the price of the security is likely to fall. The double top pattern is formed when the price of a security reaches a high point, pulls back, and then reaches the same high point again. The second peak is usually lower than the first peak, and the price then falls below the low point between the two peaks.
History of the Term
The double top pattern was first identified by Charles Dow, the founder of Dow Theory. Dow Theory is a theory of market behavior that is based on the idea that the market is made up of three distinct trends: primary, secondary, and minor. The double top pattern is a primary trend reversal pattern, meaning that it signals a change in the direction of the primary trend. The double top pattern is also known as the “M” pattern because of its shape.
Comparison Table
| Pattern | Reversal | Shape |
|---|---|---|
| Double Top | Bearish | M |
| Double Bottom | Bullish | W |
Summary
Double top is a technical analysis charting pattern that describes the behavior of a security’s price. It is characterized by two consecutive peaks that form a “M” shape and is considered a bearish reversal pattern. The double top pattern was first identified by Charles Dow, the founder of Dow Theory. For more information about this term, you can visit websites such as Investopedia, TradingView, and StockCharts.
See Also
- Double Bottom
- Head and Shoulders
- Triple Top
- Triple Bottom
- Cup and Handle
- Flag and Pennant
- Rising Wedge
- Falling Wedge
- Symmetrical Triangle
- Ascending Triangle
