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A Double Bottom is a technical analysis term which signals a potential trend reversal from bearish to bullish. Other bullish patterns include Cup and Handle and Triple Bottom. The Double Bottom pattern was introduced by William J. O’Neil.
A double bottom is a chart pattern created when a stock makes a low, rebounds, then retests the same low and rebounds once again. A double bottom chart pattern resembles a “W”. A double bottom chart pattern has great significance for a chartist or technical analyst. To a technical analyst, the double bottom formation implies that a stock has hit an important support level and is having trouble going lower. For a technical analyst, a double bottom chart pattern may indicate that a stock has made a low and is now poised for an upward move. However, a break below the support line created by a double bottom pattern is considered extremely bullish. Double bottom chart patterns can be found on intra-day charts, daily, weekly, monthly, yearly and even longer-term charts. The opposite of a double bottom chart pattern is a double top pattern.
A Double Bottom occurs when the price of a stock unsuccessfully attempts to fall through a support level twice.
The Double Bottom pattern, which looks like the letter ‘W’ on a stock chart, often precedes a breakout through the resistance level (middle of the W) and further advances.
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This glossary post was last updated: 22nd March, 2020 | 0 Views.