Double top / double bottom
A double top is two peaks near the same price that both fail to push higher, with a dip between them. A double bottom is two troughs near the same price that both fail to fall lower, with a rise between them. Each is a record of what the crowd has already done, not a forecast of what it will do next.
How the shapes form
A chart pattern forms because the crowd trading a share keeps doing the same thing at the same price. Buyers push the price up and sellers turn it back. Buyers try again at nearly the same level and are turned back again. That failed struggle leaves two peaks close together on the chart, a double top. The mirror image, two troughs close together, is a double bottom.
The neckline
Each pattern has a neckline: the level the price fell to, or rose to, between the two peaks or troughs. The neckline marks the point the pattern has not yet proven itself. The shape only means something once price actually breaks through that line.
A record, not a forecast
Spotting the shape is not the same as knowing what happens next. A pattern fails often enough that treating it as certain is a mistake, not a sign you read it wrong. A confirmed break and a plan for your risk are the second step after seeing the shape.
Part of a family
The double top and double bottom are two of the three patterns worth knowing by sight. The third is the head and shoulders, three peaks with the middle one tallest. All are built from the same two pieces: the peaks or troughs, and the neckline.
A double top and its neckline (hypothetical numbers)
Priya bought a stock at ₹430, and it forms two peaks near ₹480 and ₹478 with a dip to ₹440 between them. The neckline is ₹440. She waits for a close below ₹440 before treating the pattern as confirmed, and she had already decided to sell below it. That keeps a gain of about ₹10 a share over her entry, instead of waiting to see how far the price falls.
Common questions
- What is a double top?
- Two peaks near the same price that both fail to push higher, with a dip between them.
- What is a double bottom?
- Two troughs near the same price that both fail to fall lower, with a rise between them.
- What is the neckline?
- The price level between the two peaks or troughs. The pattern is not confirmed until price breaks through it.
- Does a double top always mean the price will fall?
- No. A pattern is a record of what happened, and it fails often enough that it should never be treated as certain.