The Double Top pattern appears on a candlestick chart as a letter "M." According to this pattern, when a stock, after remaining near a certain price for a long time, moves up to a certain price, then pauses briefly at a slightly lower price, then moves back up to the point where it started down, and after a brief pause, returns to the point where it started up, the pattern is considered complete.
The Double Top pattern today. It's a bit interesting because it looks just like the letter "M" on the chart.
Imagine there’s a stock that’s been moving around at a certain level for a while. Suddenly, it gets some energy and starts moving up. It reaches a certain high point, gets a little tired, and takes a small pause by coming down slightly.
But then, it thinks, "Maybe I can go even higher!" So it gathers strength again and tries to climb back up. It manages to reach exactly the same high point where it stopped the first time.
Now, here’s the important part. When it reaches that same peak for the second time, it just doesn’t have enough strength to break through. It’s like hitting a ceiling. So, it turns around and starts falling back down, all the way to the level from where it originally started climbing up.
So, what do we see? The price went up, came down a bit, tried going up again to the same height, and then fell back down. This movement draws an "M" shape on the chart.
This whole story is called the Double Top pattern. It’s a signal that the stock, instead of going higher, is likely to start falling. Think of it like knocking on a door twice. If no one answers, you just turn around and leave. That’s exactly what this pattern means.
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