Option Investor

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Double Tops

A double top pattern is a reversal pattern and is also sometimes referred to as an "M" formation, since it resembles one on a chart. A double top pattern is formed when a stock or index trades to a high on strong volume, finds resistance, and pulls back to support. The stock or index then makes another move up, this time with less volume backing the move and again finds resistance. The trend reversal is confirmed when the stock or index trades back through the valley formed by the first pullback.