Double Top Pattern - M Top

The M Top, also known as the double top, is one of the more common reversal patterns in candlestick charts, formed by two relatively close high points. Its shape resembles the English letter 'M', hence the name. During a continuous upward movement, when the stock price rises to a certain price level and the trading volume significantly increases, the price begins to turn down; after falling to a certain position, the price rebounds again, but the trading volume is slightly lower than at the first peak. After rebounding near the previous high, it falls again for the second time, breaking below the first low point, creating an M-shaped trajectory. The double top is formed.

The characteristics of the M Top are as follows:

1. The M Top pattern forms after the price has risen to a certain stage and presents two peaks, referred to as the left peak and the right peak. Theoretically, the two high points of the double top should be roughly equal, but in actual candlestick movements, the left peak is generally slightly lower than the right peak, with a difference of about 3% being quite common.

2. At the low point formed after the first peak (left peak), a horizontal line is drawn, which creates what is commonly referred to as the neck line. When the stock price rises again and falls below this horizontal line (neck line) support, the double top pattern is officially declared to have formed.

3. During the formation of the double top, the left peak has a larger trading volume, followed by the right peak. The trading volume shows a decreasing trend, indicating that the buying strength during the second rebound is getting weaker, suggesting that the price rise is nearing its end.

4. After the double top pattern forms, the price often exhibits a pullback during the downward movement, but the pullback strength is not strong, with the neck line position providing strong resistance.

When investors encounter the M Top pattern, how can they find the best selling point?

The first selling point is at the turning point of the right peak of the 'M Top'. Most investors sell here. This is the best selling point for the 'M Top', and those who sell here can be considered 'prophets'.

The second selling point is at the neck line. When the stock price falls below the neck line, it indicates that a larger downward trend is about to come, and selling all holdings at this time is the wisest operation.