Double tops and bottoms

Double top is the most wide spread figure of a trend turnaround. Striking the resistance level the chart draws two maximum points of the same level and then turns the opposite direction. It is preferable that two peaks were clearly drawn. The model is considered to be complete after the prices cross support level to which they may return after breakout but the downtrend will continue anyway.

Double top figure formation
Fig.1. “Double top” figure formation

The “double bottom” figure is identical to the described above but it is formed in the opposite direction.

Formation period is also very important for making right predictions. The most valuable models are those that form during the period from some weeks up to some months.

There are a lot of false signals between tops or bottoms that can be sifted out with the help of volume indicators (every new peak decrease the volume) or with the help of analyzing divergence of Relative Strength Index.