Double Top Pattern – A bearish reversal signal

The Double Top is one of the most well-known bearish reversal patterns in technical analysis. It signals a potential trend change from bullish to bearish and can provide traders with strong shorting opportunities when confirmed.

How It Works:
1- Formation: The price reaches a resistance level twice, failing to break higher, creating two peaks at a similar level.
2- Neckline Break: After the second peak, the price falls to the previous support level (neckline). If this level is broken, it confirms the pattern.
3- Bearish Confirmation: A breakdown below the neckline often leads to a strong downward move, as buyers lose control and selling pressure increases.

Key Trading Strategy:
✅ Entry: Enter a short position once the neckline support is broken.
✅ Stop Loss: Set above the second peak to minimize risk.
✅ Profit Target: The expected price drop is usually the same distance as the height of the pattern (from peak to neckline).

In the chart above, we can see a clear Double Top formation in the NASDAQ 100. After failing twice at resistance, the price broke support, confirming a bearish trend reversal.