Lesson 6 of 8 · Candles & Chart Patterns
Double tops & bottoms
Two tests of the same level, then a turn.
A double top is two roughly equal highs separated by a pullback. The neckline is the low between them. A break below the neckline completes the pattern and signals a possible trend change.
Double top: two chances, one failure.
TOP 1 and TOP 2 mark the two equal highs. NECKLINE marks the low between them. The second high often comes on lower volume than the first, showing buyers are losing steam at the same level. That divergence is the warning before the neckline breaks.
The double bottom is the mirror.
A double bottom is two roughly equal lows with a bounce between them. A break above the neckline confirms the pattern. Both patterns are about failed attempts to push through a level on the second try: sellers failing twice at a top, buyers failing twice at a bottom.
A double bottom has formed. Which way does price break?
Reveal what happened
It went up. Price broke above the NECKLINE, confirming the double bottom. This is the most common resolution when both lows hold and the second bounce shows stronger buying than the first. Not every double bottom works: a break back below BOTTOM 1 or BOTTOM 2 invalidates it completely.
Price hits a new high, pulls back, then rallies to nearly the same level on lower volume before dropping. What is this?
Show the answer
B. A double top. Two roughly equal highs on declining volume, followed by a break below the neckline, is a textbook double top.