The science of trading market momentum for stocks, options, futures and bonds. Our critical day analysis is all about trend reversals. When price peaks after a rise, and the decline that follows leads to another rise in prices to form a second peak at or about the level of the first peak, a double peak is said to have formed. A neckline can be drawn across the base of the two peaks. A neckline is simply a trendline and penetration through a neckline after a decline from the second peak is a good indication that the price of the tradable will continue to fall.
Volume is generally greater in generating the first top than in making the second.
A double top is simply two peaks. After the second peak is formed a breakout through the base is a signal of a possible reversal of the trend in prices. In the case of a double bottom, two troughs form and an expectation follows for the possibility of a trend reversal if the market price rises through the base. Waiting for confirmation is important for trading double tops. Volume is usually higher on the left peak than on the right peak.