[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.