14 August 2026 · James Ellison
Double tops: when the second peak confirms exhaustion
Double tops appear on every intermediate trader's chart at some point. The pattern looks simple — two peaks at roughly the same price, a valley between them — but most failed reversal trades come from treating the second peak as confirmation when it is still only a warning.
Defining a valid double top
We require the two peaks to occur within a defined uptrend with at least three higher lows preceding the first peak. The peaks should be within one to two percent of each other on daily charts (tighter on intraday). If the second peak exceeds the first by a meaningful margin, you are looking at trend continuation, not exhaustion.
The neckline is not optional
Draw the neckline across the lowest point between the two peaks. A double top is incomplete until price closes below that neckline on volume that exceeds the twenty-day average. Wicks below the neckline without a body close are retests in progress, not confirmed breaks.
Volume tells you which peak matters
Ideally, volume on the second peak is lower than on the first — a sign that buyers are tiring. When the second peak prints higher volume, treat the pattern with scepticism until the neckline break proves otherwise. We saw this repeatedly on mining shares during the July 2026 rally.
Entry timing after confirmation
After the neckline break, wait for the retest. A valid retest touches or slightly pierces the neckline from below and rejects within one to three sessions. Your entry candle should close back below the neckline with a body at least half the average range. Enter on that close or place a limit at the neckline on the retest — not on the initial break spike.
When to stand aside
Skip the trade if the broader index is in a strong uptrend and your stock is a laggard catching up — the double top may be a bull flag instead. Skip it if earnings or a dividend date falls within five sessions. Structural rules do not override event risk.