GLOSSARY // Technical Analysis
Double Top
A double top is a reversal pattern in which price hits roughly the same high twice, separated by a pullback, and then breaks below the low between the peaks. The two failures at one level show that supply reliably appears there; the break of the interim low shows demand has stopped defending the range.
Confirmation discipline is what makes the pattern usable. Two similar highs alone are not a signal; stocks retest highs and punch through them constantly, and buying that breakout is a better-performing setup than shorting every pair of matching peaks. The double top exists only after the neckline (the interim low) gives way, and the second peak forming on lighter volume than the first improves the odds.
The measured target projects the pattern's height, peak to neckline, downward from the break.
A stock rallies to 74.80 in March, pulls back to 70.00, and rallies again to 75.10 in April on 35% less volume. The failure sits within half a percent of the first peak. In May it closes at 69.40, breaking the 70.00 neckline. Pattern height is about 5 points, projecting 65; the stock bases at 65.80 six weeks later.
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Educational only — not financial advice. Definitions simplified for clarity; markets are messier than definitions.