Double Top & Double Bottom
Two failed attempts at the same level — the market voting twice that price won't go further.
Reversal PatternsIntermediate 5 min read· Lesson 1 of 6 in Chart Patterns
Structure & psychology
A double top: rally to a high, pullback, second rally that FAILS at roughly the same high, then a break of the middle trough ('neckline'). Two rejections prove supply at that level; the neckline break confirms demand has given way. The double bottom ('W') is the mirror — two holds of the same low.
Entry
On the close through the neckline (trough for tops, peak between lows for bottoms). Aggressive traders anticipate at the second test with a candle signal (e.g. bearish engulfing at the second top); the confirmed entry is the neckline break.
Stop loss
Above the second peak (tops) / below the second trough (bottoms) — beyond that, the 'failure at the level' thesis is dead.
Target
Measured move: pattern height (peak to neckline) projected from the break. A $10-tall top breaking a $100 neckline targets ~$90. Treat as a zone; take partials.
Failure conditions
Price reclaiming the neckline shortly after breaking it (a 'failed break' — often violently tradable the OTHER way), or the second peak decisively EXCEEDING the first (that's not a double top anymore, it's a breakout).