How to Trade a Double Tops Chart Pattern in Stocks

To interpret the double tops chart patterns a trader needs to first learn about the technical analysis of double tops chart patterns explained below.

Double Tops Chart Pattern

Double tops stocks pattern is a reversal chart pattern that forms after an extended upwards stock trend.

As its name implies, this double tops chart pattern formation is made up of two consecutive peaks on the stock chart that are roughly equal, with a moderate trough in between the two peaks.

Double tops stocks chart pattern formation is considered complete once stocks price makes the second peak and then penetrates the lowest point between the highs, called the neckline.

The sell signal from this double tops chart pattern formation occurs when the stocks market breaks-out below neck line.

In Stocks, this double tops chart pattern is used as a early warning signal that a bullish stock trend is about to reverse.

However, double top chart pattern is only confirmed once the neckline is broken & the stocks market moves below the neckline.

Neckline is just another name for last support area formed on the Stocks chart.

Summary:

• Double tops stocks chart pattern forms after an extended move upwards- upwards stocks trend
• This double tops pattern signal indicates that there will be a reversal in stocks market trend
• We sell when the price breaks-out below neck-line: as explained on the stocks example illustrated and explained below.

Stocks Trade a Double Tops Chart Pattern in Stocks?

Double tops stocks chart pattern look like an M-Shape pattern, the best reversal stocks signal from the double top chart pattern is where second top is lower than the first top as shown below:

This means that the reversal stocks signal can be confirmed by drawing a downwards stocks trend line as shown below. If a trader opens a sell stocks trade using this double tops reversal stocks signal the stop loss will be placed just above this downward trend line.

How to Trade the Double Tops Pattern - How Do I Analyze a Double Tops Chart Pattern in Stocks