List of Financial Market Terms

In stock trading, options trading, and futures trading, "double top" describes the rise of a stock, a drop, another rise like the first, and then another drop.

Generally, the difference between the peaks (A) and trough (B) can be the least amount the stock is expected to fall once it breaks below the B line (also known as double top support).

See the picture below to view the "M" shape a double top makes when viewing from a live trade room or day trade system.

double top pattern in stocks

The difference between double top resistance and double top support establishes the height of the move, which translates into the measuring implications used in this formation.  In the example above, double top resistance resides at approximately 156 while double top support resides at 142. This results in a height of 14 (large yellow oval), which results in a measured move of 128 (small yellow oval) when subtracted from the double top support breakout level of 142. 

As you can see, the stock did reach the anticipated level of 128. Double Tops are dependable patterns, and we use them very often in stock trading, options trading, and futures trading.

See also: Double bottom pattern , triple top pattern, triple bottom pattern, ascending triangle pattern.

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