The "Double Top" is a bearish reversal chart pattern that appears in an uptrend market after a stock or an index has reached a high price level two times and failed to break through it. This pattern signals that the trend has changed and the price is likely to fall.
The double top pattern is characterized by two peaks of similar height, with a moderate trough in between. The two peaks represent a resistance level that the price was unable to break through. The moderate trough represents the level of support, which fails to hold the price from falling. After the second peak, the price starts to fall, and the bearish trend continues until a new support level is established.
The double top pattern is an important signal for traders and investors, as it suggests a potential change in market direction. Traders often look for confirmation of a trend reversal through other technical indicators, such as the Moving Average Convergence Divergence (MACD) or the Relative Strength Index (RSI), to confirm the bearish reversal signal.
It's important to note that the double top pattern is not a guarantee of a trend reversal, and the price may continue to rise even after forming the pattern. Traders should use this pattern in conjunction with other analysis methods to make informed trading decisions.
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