Recently, I saw someone discussing candlestick patterns again, and it reminded me of the classic reversal signal, the M-top pattern, which is definitely worth a good discussion.

In fact, the M-top is also called a double top, and it’s one of the most common top-finding patterns I encounter in live trading. Simply put, the price rises continuously, then at a certain high point, it drops with increased volume, then rebounds and pushes higher again, but the second push is noticeably weaker. Eventually, it falls back down, and the overall movement looks like the letter "M," hence the name M-top.

I’ve noticed that there are several particularly noteworthy aspects in the formation process of the M-type reversal. First, the two peaks of the double top usually aren’t exactly the same height. Typically, the left peak is slightly lower than the right, often by about 3%. This actually reflects the weakening momentum in the market. After the first peak forms and pulls back, that low point is called the neckline. This line is especially important because once it’s broken, it means the M-top pattern is officially confirmed.

Volume is also quite interesting here. Usually, the volume at the left peak is the highest, followed by the right peak, with decreasing volume throughout the process. What does this indicate? It suggests that by the time of the second rebound, the buying momentum has significantly diminished, and the price seems to be reaching a top. Moreover, after the M-top forms, although the price may experience some rebounds during the decline, these rebounds are often weak, and the neckline acts as a strong resistance level.

So, how do I find selling points in practice? I have two key positions. The first is when the right peak of the M-top turns down—that’s the earliest signal to identify a sell. Those who can act at this point are indeed quick responders. But a more reliable approach is to wait until the price breaks below the neckline. At this point, a larger downward move is likely to follow, and closing all positions then is the most prudent choice. Although this might not be the absolute top, it’s safer and more reliable, and less likely to be fooled by a rebound.