Double Top technical analysisThis is a major reversal pattern in technical analysis which occurs after an extended uptrend.In simple understanding this pattern looks like 2 consecutive peaks which are almost equal with a moderate trough in between.
It is considered as a indication of buyers are loosing interest in it and upward trend is weakening.Upon completion of this pattern, the trend is considered to be reversed and the security is expected to move lower. stockcharts.com have specified some key points which should be considered before reaching any conclusion.First is the prior trend in case of the double top, a significant uptrend of several months should be in place. First peak should mark highest point in current trend.Its trough or the declines.Second peak now the second peak would be with low volume and meets resistance from the previous high.Now when there is decline from second peak the decline in volume and accelerated descent should be watched.Then there are support break and support turned resistance.And lastly the price target.The pattern is completed when thesecurity falls below or breaks down the support level that had backstopped each move the security made, thus marking the beginnings of a downward trend.
Volume is also a key point to watch out as there should be increase in volume when the security falls below the support level.