Double Top / Double Bottom

Double tops and double bottoms are among the most common and reliable reversal patterns in technical analysis. A double top forms when a security's price rises to a resistance level, pulls back, rallies again to approximately the same level, and fails a second time — creating an "M" shape. This pattern signals that buyers tried twice to push through a ceiling and failed, suggesting a reversal to the downside. The breakdown is confirmed when price falls below the trough between the two peaks (the "neckline"). A double bottom is the mirror image: price falls to a support level, bounces, declines again to approximately the same level, and holds — creating a "W" shape. This signals that sellers failed twice to push the price lower, suggesting a reversal to the upside. The breakout is confirmed when price rises above the peak between the two troughs. The measured move target for both patterns equals the distance between the peaks/troughs and the neckline, projected from the breakout point. For a valid pattern, the two peaks (or troughs) should be approximately equal in price (within 3-4%), separated by at least several weeks, and the breakout should occur on above-average volume. The time between the two tests should be meaningful — patterns forming over weeks or months are more significant than those over just a few days. Double tops have a success rate of approximately 65-75% when properly identified.