Description

Double Top is a chart pattern used in technical analysis of financial markets. The pattern is characterized by two consecutive peaks of approximately equal height, with a moderate trough in between them. The pattern is considered a bearish indicator, suggesting that the price of the asset being studied is likely to fall in the near future.

The pattern is usually formed when an asset is trending upwards, as the price reaches a resistance level (the first peak) and then pulls back slightly before once again attempting to break through the resistance. If the asset fails to break through and the price falls, creating a trough, and then rises once again to the same resistance level, creating the second peak, this is interpreted as a sign that the resistance level is likely to hold and the price is likely to fall soon.

The "Double Top" pattern is often accompanied by a decrease in volume as the price reaches the first peak and then the second peak, which further confirms the pattern. The decrease in volume indicates a lack of market interest in buying the asset, suggesting that the asset is unlikely to break through the resistance level.

This pattern is often considered to be complete once the price falls below the low point of the trough between the two peaks. This break below the trough is considered to be the signal that the price will continue to fall in the near future.

When trading using the double top pattern, it is important to remember that the pattern is not always reliable and that other forms of technical analysis should be used to confirm the signal. Additionally, the pattern can be subject to false signals, so it is important to pay close attention to the market for further confirmation of the trend. Furthermore, the double top pattern is best used in combination with other technical analysis tools such as support/resistance analysis and trend lines to confirm the signal.