A Double Bottom is a reversal pattern that happens at the height of a downward slope and can indicate the commencing of an up trend.
How Do I Recognize a Double Bottom Chart Pattern?
A double bottom chart pattern takes place in four steps: 1. A new low for price is reached 2. The price finds support and rises to a new high, creating a new resistance point 3. The price commences to move back down to support, but then rises again towards resistance 4. The price breaks through resistance, building an upward trend
What Does a Double Bottom Chart Pattern Mean?
A double bottom chart pattern can signify a tug of war between buyers and sellers. As sellers attempt to push the contract, buyers resist the down trend. When once again the bottom of the pattern isn't broken, the sellers begin to back off, leading the buyers to dominate and send the price up.
Watch the new up trend, as it may drop back down to the breakout point to test the new support.
Big W
Note that a similar chart pattern is the Big W, which has all the principles of a Double Bottom, but with much steeper moves.
