What is double bottom? Explaining typical chart patterns for determining bottoming

2024-02-26

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[Summary]

A double bottom is a chart pattern in which the price makes two similar lows and then rises.

It is known as a typical example of bottoming out and is used to see if a downtrend has begun to reverse.

What is double bottom?

A double bottom is when a stock price hits a low, rebounds, drops to the same level again, and then rises again.

It is also called W bottom because it looks like the letter W.

neckline is important

In a double bottom, the high between the two troughs is called the neckline.

If the price breaks above this neckline, it will be easily recognized as a sign of an upward turn. Just hitting the second low isn't done yet.

Points to see

Are the two lows close to each other?
Is selling weak due to second drop?
Did it go above the neckline?
Is trading volume increasing?

Summary

The double bottom is a basic pattern for reading the firmness of the lower price and the bottoming out.

Don't assume it's done until it's above the neckline. Even if it looks like a W, if it doesn't break out, it will just be a rebound on the way down.