Pattern failed_double_top

Failed Double Top Breakout

Bearish reversal: price broke above resistance (double top breakout) but then falls back below the resistance level. Bulls are trapped. Failure threshold normalized by daily volatility.

Signal family

Pattern — Formal chart-pattern detectors (double tops / bottoms, failed breakouts, HH/HL structure).

Parameters

Name Description Default Range
peak_order Peak detection window 15 5–25
tolerance_zscore Tolerance (z-scores of daily vol) 1.5 0.5–3.0
failure_window Max days for failure after breakout 60 20–120

Historical context

72,982 triggers on 19,843 tickers, 1989-02-28 → 2026-05-01. Universe: US large-cap (mcap ≥ $100,000,000, price ≥ $1). Long-only convention: BUY at open T+1, hold the horizon, compare to S&P 500 Equal Weight over the same window.

Methodology footnotes

Benchmarks shown in the detail tables: spxew (S&P 500 Equal Weight — primary, median-stock view, avoids the 2020+ megacap-concentration distortion), spx (S&P 500 cap-weighted, distorted post-2020), msci (MSCI World USD). Per-stock regime tags: trending = ADX(14) ≥ 25, high vol = 20d realized annualized vol ≥ 20%. 1d return = intraday T+1 open→close; 20d = open T+1 to close T+20.

At a glance — alpha vs S&P 500 Equal Weight, US-only

Holding-period sensitivity. Bullish columns: positive = signal worked (long the trigger beat the index). Bearish columns: negative = signal worked (the flagged stock underperformed).

Horizon Bearish α
5-day +0.31%
20-day +0.53%
60-day +0.37%
1-year +3.43%
Random-date null check (20-day): Bearish: worse than random (p=1.000).

Failed Double Top Breakout is a single-direction signal — only the bearish side is meaningful.

Where does FAILED_DOUBLE_TOP actually fire?

The bucket distribution often reveals what the signal really is, regardless of its textbook label. Heavy concentration in "non-trending + high vol" = it's mostly a chop-market event. Heavy in "trending + low vol" = it picks up the smooth grinds. Read the chart before the alpha numbers — context shapes everything that follows.

Failed Double Top Breakout (failed_double_top) — trigger count distribution by per-stock regime quadrant (trending/non-trending × high/low realized volatility) for , US-only universe

Does it work in every regime?

Trigger alpha split by the host stock's own regime on the trigger date — trending or ranging, high-vol or low-vol. The 20d alpha you'd actually capture if you took the trade. Bars matching your direction's "right" sign (green) = the signal worked in that regime; opposite sign = avoid it there. A signal with one strong-positive bar and three flat ones isn't a "20d alpha" signal — it's a "20d alpha when the stock is X" signal.

Failed Double Top Breakout (failed_double_top) — mean 20-day alpha versus S&P 500 Equal Weight by per-stock regime quadrant, side by side
Trending + Low vol
Stock in a clean directional move with low realized volatility. Textbook "trend-following paradise" — smooth grind with little whipsaw risk.
Trending + High vol
Violent directional moves — parabolic rallies, crisis selloffs. Trend exists but the path is noisy. Signal timing may be imprecise.
Non-trending + Low vol
Quiet chop, summer doldrums, consolidations. No directional bias but also no big swings — small edges become reliable if they exist at all.
Non-trending + High vol
Choppy and violent — the classical "whipsaw zone" for momentum signals. Crossovers and breakouts fire repeatedly without follow-through.

Does it work in every era?

A multi-year average can hide major instability. The sample splits into three windows: 2015–2019 (pre-COVID), 2020–2022 (pandemic + 2022 bear), and 2023+ (post-ZIRP + AI megacap rally). All three matching your direction's "right" sign = the signal is durable. One era doing all the work = a regime-specific edge that may not repeat. The bigger the variance across eras, the smaller the position you should run.

Failed Double Top Breakout (failed_double_top) — 20-day alpha split by historical sub-period (2015-2019, 2020-2022, 2023+) to check consistency across market regimes

↓ Bearish triggers negative alpha = signal was right (stock underperformed market)

Bench Metric 1d 5d 20d 60d 252d
spx Stock % +0.13% +0.48% +1.25% +2.89% +13.78%
Bench % +0.01% +0.25% +1.11% +3.33% +14.32%
Alpha % +0.12% +0.23% +0.17% -0.53% -0.72%
Median alpha +0.04% -0.13% -0.94% -3.12% -10.38%
Hit rate (α>0) 50.8% 48.8% 45.7% 41.9% 38.3%
p (naive) <0.001 <0.001 0.0002 <0.001 0.0009
p (HAC) <0.001 <0.001 0.0003 <0.001 0.2296
N 71,065 68,947 68,569 65,687 58,223
msci Stock % +0.13% +0.48% +1.25% +2.89% +13.78%
Bench % +0.02% +0.24% +0.94% +3.00% +11.75%
Alpha % +0.11% +0.26% +0.30% -0.06% +1.32%
Median alpha +0.03% -0.10% -0.81% -2.70% -8.01%
Hit rate (α>0) 50.5% 49.1% 46.3% 42.9% 40.6%
p (naive) <0.001 <0.001 <0.001 0.4441 <0.001
p (HAC) <0.001 <0.001 <0.001 0.5331 0.0294
N 70,813 68,650 67,998 65,408 57,727
spxew Stock % +0.13% +0.48% +1.25% +2.89% +13.78%
Bench % +0.03% +0.17% +0.72% +2.46% +10.21%
Alpha % +0.10% +0.31% +0.53% +0.37% +3.43%
Median alpha +0.03% -0.04% -0.56% -2.10% -6.03%
Hit rate (α>0) 50.5% 49.6% 47.4% 44.4% 42.8%
p (naive) <0.001 <0.001 <0.001 <0.001 <0.001
p (HAC) <0.001 <0.001 <0.001 0.0002 <0.001
N 70,547 68,303 67,835 64,962 57,602
Distribution of all 20d alpha outcomes for this direction. Median and winsorized mean shown.
Failed Double Top Breakout (failed_double_top) — bearish 20-day alpha histogram showing distribution of per-trigger returns
Observed 20d alpha (vertical line) against the null distribution of random-date firing. If the line is deep inside the null cloud, the signal adds no information. If it sits in a tail, the signal is doing real work in that direction.
Failed Double Top Breakout (failed_double_top) — bearish 20-day observed alpha versus random-date permutation null (200 iterations)
Permutation null detail — all horizons × both benchmarks
200-iteration null: for each ticker, sample N random dates from its history (matching observed trigger count) and compute the same alpha. Both observed and null are baseline-centered per ticker (each ticker's own baseline alpha is subtracted), so the null distribution is centered on ~0 and the comparison tests signal effect alone — not the universe-selection lift that all surviving large-caps share. pperm = one-sided fraction of null iters with mean in the "signal was right" tail (right for bullish, left for bearish).
Horizon Bench Observed lift Null mean Null 95% CI pperm
1d spx +0.23% +0.09% [+0.07%, +0.11%] 1.000
1d msci +0.25% +0.09% [+0.07%, +0.11%] 1.000
1d spxew +0.23% +0.08% [+0.06%, +0.10%] 1.000
5d spx +0.64% +0.37% [+0.32%, +0.42%] 1.000
5d msci +0.67% +0.37% [+0.33%, +0.42%] 1.000
5d spxew +0.68% +0.35% [+0.30%, +0.40%] 1.000
20d spx +1.42% +1.16% [+1.07%, +1.25%] 1.000
20d msci +1.44% +1.17% [+1.08%, +1.26%] 1.000
20d spxew +1.56% +1.13% [+1.04%, +1.22%] 1.000
60d spx +2.13% +2.45% [+2.30%, +2.60%] 0.005
60d msci +2.17% +2.46% [+2.31%, +2.61%] 0.005
60d spxew +2.29% +2.37% [+2.21%, +2.52%] 0.149
252d spx +4.91% +5.00% [+4.67%, +5.30%] 0.284
252d msci +4.70% +4.92% [+4.61%, +5.22%] 0.095
252d spxew +5.02% +4.65% [+4.33%, +4.92%] 0.995

Example triggers on US large-caps (2023+, mcap ≥ $30B)

Six recent bearish FAILED_DOUBLE_TOP triggers on US mega-caps. Top three: the signal's best outcomes. Bottom three: the worst. Catalyst-driven outliers (|α| > 25%) excluded so what's left is the signal's own typical good and bad days, not earnings shocks.

Strongest outcomes (what FAILED_DOUBLE_TOP looks like when it works)
Failed Double Top Breakout (failed_double_top) — strongest bearish trigger #1 on a US mega-cap, showing the stock's OHLC candles, moving averages, signal-specific overlays, and the 20-day forward window Failed Double Top Breakout (failed_double_top) — strongest bearish trigger #2 on a US mega-cap, showing the stock's OHLC candles, moving averages, signal-specific overlays, and the 20-day forward window Failed Double Top Breakout (failed_double_top) — strongest bearish trigger #3 on a US mega-cap, showing the stock's OHLC candles, moving averages, signal-specific overlays, and the 20-day forward window
Weakest outcomes (what FAILED_DOUBLE_TOP looks like when it fails)
Failed Double Top Breakout (failed_double_top) — weakest bearish trigger #1 on a US mega-cap, showing the 20-day forward window where the signal failed Failed Double Top Breakout (failed_double_top) — weakest bearish trigger #2 on a US mega-cap, showing the 20-day forward window where the signal failed Failed Double Top Breakout (failed_double_top) — weakest bearish trigger #3 on a US mega-cap, showing the 20-day forward window where the signal failed
Stock-regime quadrants (2×2 per-stock, 20d alpha detail table)
Each quadrant groups triggers by the stock's own ADX(14) and RV(20) at the trigger date — the textbook conditioning variable (not market-level). Stock %, bench %, alpha %, and HAC p-value shown for each benchmark.
Quadrant N Stock % (spx) Bench % (spx) Alpha % (spx) p (HAC) Stock % (msci) Bench % (msci) Alpha % (msci) p (HAC) Stock % (spxew) Bench % (spxew) Alpha % (spxew) p (HAC)
Trending + Low vol Clean directional grind, low whipsaw 2,228 +0.54% +1.03% -0.46% 0.0040 +0.54% +0.81% -0.25% 0.0983 +0.54% +0.51% -0.00% 0.9945
Trending + High vol Crisis selloff or parabolic rally 39,552 +1.64% +1.11% +0.58% <0.001 +1.64% +0.96% +0.72% <0.001 +1.64% +0.70% +0.98% <0.001
Non-trending + Low vol Quiet chop, summer doldrums 4,189 +0.28% +1.11% -0.80% <0.001 +0.28% +0.91% -0.61% <0.001 +0.28% +0.66% -0.36% 0.0005
Non-trending + High vol Classical "whipsaw zone" for momentum 27,012 +0.91% +1.07% -0.18% 0.0105 +0.91% +0.88% -0.07% 0.3463 +0.91% +0.72% +0.12% 0.0940
Sub-period breakdown table (20d alpha)
Historical clustering check. If alpha concentrates in one era, the signal's robustness is questionable.
Period N Alpha % (spx) p (HAC) Alpha % (msci) p (HAC) Alpha % (spxew) p (HAC)
2015-2019 2015-01-01 → 2020-01-01 17,841 -0.19% 0.0151 +0.04% 0.5605 +0.03% 0.6911
2020-2022 2020-01-01 → 2023-01-01 22,296 +0.33% 0.0004 +0.50% <0.001 +0.26% 0.0053
2023-2026 2023-01-01 → 2099-01-01 32,817 +0.27% 0.0004 +0.32% <0.001 +1.01% <0.001

Methodology and caveats

How to read. Entry at open of T+1 (one trading day after the signal fires on close of T). 20d = open T+1 to close T+20. Alpha = stock return − benchmark return over the same window (Convention A, single-sided, textbook). For bullish triggers, POSITIVE alpha = signal was right. For bearish triggers, NEGATIVE alpha = signal was right (stock underperformed market). No sign-flipping; the direction of the bet determines what "good" looks like. Per-stock regime is each stock's own ADX(14) and RV(20) at the trigger date — not market-wide state.

Three p-values, three robustness tests. (a) p_naive: scipy one-sample t-test on winsorized alphas. Optimistic because overlapping 20d windows on the same ticker inflate effective N. (b) p_hac: Newey-West HAC with lag = horizon — corrects for the overlap and is the academic-finance standard. (c) p_perm: fraction of 200 random-date null iterations with mean ≥ observed. Tests whether the signal beats random date selection at all. A signal that clears all three (pnaive, phac, pperm all < 0.05) has real information; a signal that fails pperm has zero edge even if the t-test says "significant."

Caveats. (i) Universe reflects today's active tickers; delisted losers pruned → survivorship bias. (ii) Mcap ≥ $100M filter uses today's snapshot, not point-in-time — mild lookahead on which stocks enter the sample, not on returns. (iii) Means and p-values use winsorized alphas (1/99 percentile) to prevent data errors from dominating. Medians and hit rates use raw data. (iv) Zero transaction costs assumed. Realistic bid-ask + commissions remove 20–40bps from 20d alpha on US large-caps, more on small-cap. Sub-20bps alpha is noise in practice. (v) Past performance does not predict future results.

How to use this

1 · When to reach for this signal

Caution recommended. Bearish 20d alpha is +0.17% and worse than random . Either direction fails the "beats random" test. Don't use Failed Double Top Breakout as a standalone entry trigger. It may still be useful as part of a composite (section 4).

2 · When it works — the setups that drive it

  • Best bearish setup: Trending + High vol — alpha +0.58% / 20d on 39,552 historical triggers.
  • Best era for bearish: 2020-2022 — alpha +0.33% / 20d.

3 · When it fails — common false positives

  • Weakest bearish cell: Non-trending + Low vol — alpha -0.80% / 20d on 4,189 triggers.
  • Worst era for bearish: 2015-2019 — alpha -0.19% / 20d.

Signal-specific failure patterns

Clean bearish alpha across both horizons
Failed double top (price broke above the resistance then fell back below) fires 12,186 bearish triggers. α=−0.36 at 20d (p(HAC)=0.001, p_perm=0.005), widening to −0.92 at 60d (p<1e-4, p_perm=0.005). The 'failed breakout trapping late buyers' thesis produces the strongest pattern-signal alpha in the suite.
evidence: bearish 20d α=−0.36 p_perm=0.005; 60d α=−0.92 p_perm=0.005
2015-2019 was a near-null regime
Sub-period bearish 20d: 2015-2019 α=+0.06 (signal fails), 2020-2022 α=−0.57, 2023-2026 α=−0.43. The failed-breakout signal works in recent years; 2015-2019 it essentially broke even. Modern-market edge is consistent with narrow-breadth megacap leadership where failed breakouts on non-leaders are penalized.
evidence: bearish 20d by period: +0.06, −0.57, −0.43
By design, this signal catches 'trap' setups
The failed-double-top structure specifically identifies a 'bulls-trapped' event: breakout above the double-top resistance, then the close falls back below, stranding late buyers with a losing position. Textbook bearish reversal pattern. The data confirms the textbook here: 60d alpha of −0.92% is substantial.
evidence: 60d alpha −0.92 with p(HAC)<1e-4
Bullish direction does not exist by design
Despite the signal name suggesting a direction-neutral setup, 'failed double top' is definitionally bearish. In v2 backtest data a small number of bullish-tagged rows (N=10) existed as pre-wrapper-refactor legacy; those were deleted in v3. The signal is single-direction.

4 · Pairing inside a screen

The statements below describe how this signal relates to others by construction — which indicator family it belongs to, and where same-family redundancy might reduce the independence of evidence inside a Daily Report. These are taxonomic classifications drawn from standard technical-analysis texts; they are not pairing backtests. A multi-signal convergence backtest is planned but not yet run.

Sequential with completed pattern

Failed-double-top and double-top-breakout fire on the same underlying pattern structure at different points: the breakout signal fires when price breaks the neckline; failed_double_top fires when the pattern fails to complete and price reverses (Edwards & Magee, Technical Analysis of Stock Trends, 11th ed. 2018; Bulkowski, Encyclopedia of Chart Patterns, 3rd ed. 2021). They are sequential rather than concurrent — one signal replacing the other as the setup evolves, not two independent pieces of evidence.

What would likely rescue this signal

This block calls out the data or conditions that could turn a technically weak signal into a usable one in a composite screen. Based on signal mechanics and the observed failure patterns above; individual combinations are not yet backtested.

  • Hold to 60d — Alpha compounds 20d → 60d significantly. Time stop rather than tight invalidation price stop.
  • Volume-gate the failure day — Failures on heavy volume are distribution events; on light volume they're noise that often reverts. Vol filter may concentrate the −0.36/−0.92 alpha.

See also Why technical-only signals don't survive on their own for the broader argument.

5 · Before you act — a 5-point checklist

  1. Normal trading day? Rule out earnings (within ±3 days), ex-dividend, or known corporate-action dates — the signal is almost certainly reading noise, not momentum, in those windows.
  2. Where is price vs its own 50 / 200 DMA? Pattern signals carry their own structural context; check that the implied support/resistance levels have historical relevance, not just the most-recent 3-month range.
  3. What's the sector breadth doing? An isolated signal in a broadly down-trending sector is a lower-confidence setup than one firing with the rest of its peer group.
  4. Is ADV20 enough for your size? If the trigger is on a $500M name and you want to move $1M notional, you're the tape. Consider adv20d ≥ 5% of your intended position.
  5. What invalidates you? Define a price level (for longs: a close below the trigger-day low; for shorts: close above the trigger-day high) and honor it. The backtest alpha is an average; any one trade can be at either tail.

Execution notes

Strong bearish edge. Hold the full 60d window — alpha doubles from 20d to 60d. Entry open T+1. Skip 2015-2019 sample in calibration (regime-different).