A bullish reversal pattern where price reaches a low point twice with a moderate rise between, forming a 'W' shape.
Deep Dive
The double bottom is the bullish counterpart to the double top. It forms when price reaches a support level twice, bounces both times, and then breaks above the resistance level (neckline) created by the swing high between the two lows. This W-shaped pattern signals that sellers have exhausted themselves and buyers are taking control.
The pattern demonstrates that sellers made two attempts to push through support but buyers defended it successfully. When price breaks above the neckline, it confirms that buyers have gained momentum. The measured move target is the distance from the lows to the neckline, projected upward from the breakout point.
Valid double bottoms have two lows at approximately the same level, adequate time between the lows for the pattern to develop, and ideally higher volume on the neckline breakout. The pattern is most reliable after an extended downtrend.
Why It Matters
Double bottoms signal the end of a downtrend and potential bullish reversal opportunities.
Related Terms
- Double Top — Double Top is a trading concept. If I thought a stock was going up, I'd zoom in on the bullish engulfing candle on the 5-minute chart, ignoring the clear double
- Breakout — A price movement through a defined support or resistance level with increased volume, signaling potential trend continuation.
- Support — A price level where buying pressure is strong enough to prevent the price from declining further. It acts as a floor for the price.