RiskPicksWhat is a Double Top / Double Bottom?
A double top is a bearish reversal pattern where price rises to the same resistance level twice and gets rejected both times, forming an "M" shape. A double bottom is the bullish version where price drops to the same support level twice and bounces both times, forming a "W" shape.
Double Top (bearish)
- First peak: price rallies to a high and pulls back
- Second peak: price rallies again to approximately the same level and fails again
- Neckline break: price drops below the pullback low between the two peaks. This confirms the pattern
- Target: measure the distance from the peaks to the neckline, then project that distance below the neckline
Double Bottom (bullish)
- First low: price drops to a support level and bounces
- Second low: price drops again to approximately the same level and bounces again
- Neckline break: price rises above the bounce high between the two lows. This confirms the pattern
- Target: measure the distance from the lows to the neckline, then project that distance above the neckline
Trading it
- Wait for the neckline break: the pattern is not confirmed until the neckline breaks. Many "double tops" turn into continuation patterns and push to new highs
- Volume: the second peak (on a double top) should ideally show lower volume than the first, confirming weakening momentum
- Stop placement: for a double top short, stop above the second peak. For a double bottom long, stop below the second low
Double tops and bottoms are among the most reliable reversal patterns, but only after the neckline breaks. Until then, it is just a stock that tested a level twice.