Double tops and double bottoms

A double top forms when, at the end of an uptrend, price hits the same resistance area twice and turns back both times; on the chart it resembles the letter "M". The horizontal line through the low between the two peaks is called the neckline. A double bottom is the same structure mirrored in a downtrend, and it looks like the letter "W".

The key sentence here: two peaks make only a CANDIDATE. The pattern completes when price CLOSES below the neckline — until that moment, what you see is price that turned twice at resistance and still fits the definition of an uptrend. Declaring a "double top" the moment the second peak appears is the most common beginner error with this pattern.

Volume and momentum feed the candidate's credibility: a second peak arriving on lighter volume, or with the bearish divergence of level 6, adds evidence that participation is thinning. But such evidence never substitutes for completion. Without a neckline break there is no double top — only a resistance tested twice and holding, which may yet turn out to be the upper edge of a rectangle.