Figure 3: Example of support turns resistance

When the Double Top pattern is confirmed, investors can look forward to a retest of the low of the trough as a resistance. As seen in Figure 3, the low of the trough in May 2000 was a support before the second peak was formed. Once broken, that support has been retested as a resistance in May 2001. This retest if fails, offers an opportunity for investors to break jail before another leg down.

This article has illustrated how to identify a Double Top pattern which is one of the major reversal patterns by paying attention to prior trend, price peaks, volume and duration. We also learn how to derive price target from the pattern and look out for a retest of the low of the trough from a support turning into a resistance level.