A double top is a pattern in a price chart where the price reaches approximately the same high level twice and then declines. It is seen as a possible sign that an upward trend is coming to an end. This pattern originates from technical analysis.
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A double top can indicate weakening buying power in the market.
The pattern forms when a share first rises strongly and reaches a peak. The price then declines, but recovers again to approximately the same level as the previous top. If it fails to break above that level, it may indicate that buying pressure is weakening. When the price subsequently falls again and drops below the interim low, many technical analysts see this as confirmation that the trend may reverse from upward to downward.
Short example:
Suppose a share rises from €40 to €60. It then falls to €50. It subsequently rises again to €60, but does not move higher. The price then declines below €50 to €45.
The two peaks around €60 together form a double top, which may indicate a possible further decline.
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