Double Top/Bottom Trend Reversal Strategy
Strategy Overview
Identify potential trend reversals using the classic double top and double bottom chart patterns.
What it is: A bearish reversal pattern.
How it looks: Price makes two consecutive peaks at roughly the same level, separated by a trough.
What it signals: The asset tried to break higher twice and failed, suggesting buyers are losing control.
Entry: Short when price breaks below the neckline (trough).
Stop-loss: Above the second top.
Target: Distance from neckline to top, projected downward.
What it is: A bullish reversal pattern.
How it looks: Price makes two consecutive lows at roughly the same level, separated by a peak.
What it signals: The asset tried to break lower twice and failed, suggesting sellers are losing control.
Entry: Long when price breaks above the neckline (peak).
Stop-loss: Below the second bottom.
Target: Distance from neckline to bottom, projected upward.
Pattern Analysis for
Scan for Trend Reversal Patterns
Find stocks showing double top/bottom patterns with our automatic scanner.
Analyze Symbol
Effectiveness by Market
| Market | Effectiveness | Notes |
|---|---|---|
| US Stocks | High | Works well with clear support/resistance |
| ASX Stocks | High | Best with high-volume, liquid securities |
Improving Accuracy
- Look for divergences in RSI and MACD
- Confirm with volume spikes on breakouts
- Trade on higher timeframes (daily, 4H)
- Best at key support/resistance levels
Adds volume on up days, subtracts on down days. Watch for:
- Bullish divergence + double bottom = strong long signal
- Bearish divergence + double top = early warning of reversal
Measures buying and selling pressure based on price and volume.
- CMF > 0 = accumulation (good for double bottom)
- CMF < 0 = distribution (good for double top)
Shows volume traded at each price level, not just over time.
- Helps identify strong support/resistance zones
- Confirms whether breakouts have conviction