📗 Educational Post :

Double Bottoms

The double bottoms chart pattern is a reversal pattern that signals a change in price direction. It is basically the opposite of a double top reversal pattern. This pattern signals the reversal of a downtrend into an uptrend.

The image below demonstrates clearly that a double bottom pattern is easily recognizable since it looks like the letter “W”.

A double bottom pattern usually forms in a situation when sellers are battling against buyers but sellers eventually fail to be in control. More buyers enter the market and push prices higher.

During a downtrend prices are reaching new lows until they find support which prevents prices from falling further. This creates the first bottom which is the lowest level. Prices soon bounce off support and retrace up to a resistance level. When prices fail to break resistance, there will be another sell off to the previous low. The re-test of the support forms the double bottom on the chart pattern. Subsequently prices climb higher after failing to break support. The double bottom formation is completed when prices break above the neckline (resistance level).

An opportunity to buy occurred just above the neckline when prices breakout above it.

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