Double Top Pattern

by · January 1, 2010

DOUBLE TOP PATTERN
buyers and sellers taking turns

Characteristics:
1. A financial instrument runs up to a particular level;
2. It then drops back from that level; then
3. Makes a second run at that level; and
4. Finally drops back off again.

Significance:
The double top pattern shows that demand exceeds supply (there are so many buyers) up to the first top, causing the prices to go up. The supply/demand situation then goes on a reverse in that supply exceeds that of the demand (there are so many sellers), causing the prices to drop. After a price “valley”, buyers again predominate and the prices go up. If traders see that prices are not pushing past their level at the first top, sellers may again prevail, lowering prices and causing a double top to form.

Notes:
1. It is generally regarded as a bearish sign if the prices go below their level at the earlier valley between the two tops.