By analyzing the most recent OHLCV price movements of the last days. Daily updated!
Double Top Pattern
The Double Top is a common chart pattern that is formed after a sustained period of upward trend and signifies a potential reversal in the trend. This pattern is identified by two consecutive peaks at approximately the same price level, with a moderate trough in-between, resembling the letter 'M'.
Characteristics of a Double Top Pattern:
- The peaks are typically spaced apart from each other, providing enough time for the market to establish each peak as a resistance level.
- It is confirmed by a return to the support level after the second peak, which should be followed by a definitive break below this level.
- The pattern indicates a switch from a bullish to a bearish market sentiment as it fails to break through the resistance level twice.
In the Double Top function:
- The function looks for two peaks in the provided price data that are within a 3% tolerance of each other in price.
- It identifies the first peak as the highest price in the data set, then searches for a second peak following it within the specified tolerance range.
- The presence of a valley or trough between the two peaks is essential for the pattern to be considered a Double Top.
- The valley must be significantly lower than the peaks, indicating that the price had a notable drop between the attempts to breach the high point.
- If these conditions are met, the function confirms the presence of a Double Top pattern.
The Double Top pattern is a bearish reversal signal in technical analysis. Traders might interpret the formation of a Double Top as an indication to potentially close long positions or to consider taking short positions. However, it is crucial to observe additional confirmatory signals such as a break of the support level with increased volume for a more reliable trading decision.