Figure 1: Example of a Double Top pattern found in STI chart.

Let us look at Figure 1 which shows a Double Top pattern found in STI chart. We had a significant uptrend from the low in August which ends with the first peak formed in October. A trough then forms in late October which leads to a price rally that took us to the second peak in early November. However, a quick check on the average volume shows that the second peak has a lower average volume as compared to the first peak. Once the price broke the low of the trough, the Double Top pattern is confirmed. Figure 1 also shows that the formation took about one month to complete.

We can also derive price target based on the Double Top pattern. This will give the trader or investor an idea of where the price is likely heading to.