Definition
A double top is a bearish reversal pattern that appears after an uptrend. Price rises to a high, pulls back to an interim trough, rises again to roughly the same high, and then declines. The two peaks and the trough between them trace a shape resembling the letter "M."
The pattern reveals that buyers attempted twice to push price higher and failed both times at a similar level. That level becomes a ceiling — a zone of resistance where sellers consistently take control. When price falls below the interim trough, the pattern is complete and a reversal of the uptrend is signaled.
Why it matters
How it works
The first peak forms when a rally loses momentum and sellers absorb the buying. The pullback to the interim trough is checked by buyers, who push price back up. The second peak is the decisive test: if sellers cap price at the same level again, it confirms that resistance is genuine and buying pressure has faded.
Confirmation requires a breakdown below the interim trough — the pattern's neckline — preferably on rising volume. The projected target is the height of the pattern, measured from the trough to the peaks, subtracted below the breakdown. Until that breakdown occurs, the formation remains only a candidate double top, since price could still rally to new highs.