A double bottom pattern is a classical pattern that indicates a change in trend and a shift in momentum from bearish to bullish. It is composed of two consecutive troughs that bottom out at roughly the same price level. This level acts as a support for the price. The double bottom formation is a bullish reversal pattern that is created after a prolonged downtrend. In order to identify this pattern, you will need to look for the following:
1. Two distinct troughs that bottom out at roughly the same price level.
2. A moderate rally in between the two troughs, creating a resistance.
3. A break above the resistance after the 2nd trough is formed.
If you see a chart with these characteristics, you have recognized a double bottom pattern.
This pattern is regarded as a very reliable reversal signal, and traders frequently use it to enter long positions.
1. Two distinct troughs that bottom out at roughly the same price level.
2. A moderate rally in between the two troughs, creating a resistance.
3. A break above the resistance after the 2nd trough is formed.
If you see a chart with these characteristics, you have recognized a double bottom pattern.
This pattern is regarded as a very reliable reversal signal, and traders frequently use it to enter long positions.