DOUBLE BOTTOM

Double Bottom pattern is a bullish reversal trading pattern and signals that a downtrend might be over, and prices could start going up. The pattern looks like the letter "W."

  1. Double Bottom

    The main difference between the Double Bottom and the Triple Bottom patterns is the number of low points. The Triple Bottom pattern requires three low points, while the Double Bottom pattern only requires two. The Triple Bottom pattern may indicate a stronger support level, but it can also take longer to form.

    How Double Bottom formed?

    • After a strong downward trend, the price reaches a low point (the first bottom) and starts to go up.
    • The price then goes down again, but not as far as the first time (the second bottom).
    • When the price starts to go up again and reaches the same level as the first bottom, that's called the neckline.
    • If the price goes up past the neckline, that's a sign the trend is changing, and prices could continue to rise.

How to take position in the market?
- Depending on trading psychology and individual risk, some Traders follow below rules to enter into positions.

  1. Entry

    • Enter a long position (buy) when the price breaks above the Neckline with a bullish candlestick and increased volume.
    • Some traders may wait for a retest of the Neckline after the breakout to confirm it as a support level.

  2. Target

    • The target price can be calculated by measuring the distance from the Neckline to the bottoms of the pattern and then adding that distance to the Neckline breakout level.
    • Alternatively, traders can use a trailing stop or take profits at resistance levels or prior highs.

  3. Stop Loss

    • Place a stop loss order below the lowest point of the Double Bottom pattern.
    • Some traders may use a more conservative stop loss level below the Neckline or below the first bottom, depending on their risk tolerance.
  • The Double Bottom pattern is typically a short-term pattern, and may not be as useful for longer-term traders or investors.
  • In double bottom pattern there are two bottom, and that are roughly at the same price level and may not be the same price level. In some cases, the second bottom may be slightly higher or lower than the first bottom.

    • Example-1 : Double Bottom pattern with Moving Average

    Example-2 : Double Bottom pattern formation after Bearish Trend

    Example-3 : Simple Double Bottom pattern

    Example-4 : Double Bottom pattern

    Example-5 : Failure of Double Bottom pattern as neckline got breakdown

    Example-6 : Fail of Double Bottom pattern as Buyers lost interest

    Example-7 : Successful formation of Double Bottom pattern with 2nd bottom False breakdown to trap Traders

    Example-8 : Double Bottom pattern with RSI

    Example-9 : Double Bottom pattern with Target

    Example-10 : Double Bottom pattern with RSI Divergence

    Example-11 : Formation of Double Bottom pattern after Oversold indicated by RSI. This can be considered as the strong reversal of Trend.



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