Double Bottom Pattern
What is a Double Bottom Pattern?
A Double Bottom pattern is identified by measuring from the lowest trough to the level of the intervening peak. It is then projected up from the break out above the resistance line.
Double bottoms are treacherous to trade, in part because of the similarity to triple bottoms and trading ranges.
Volume Confirmation
Reduced volume on the second trough followed by increased volume on the break above the resistance line.
Trading Signals
Go long on a break above the resistance line.
Place a stop-loss just below the last trough.
Price often corrects back to the resistance line which then acts as a support level. Go long on a reversal signal and place a stop-loss just below the support level.
Author: Colin Twiggs is a former investment banker with over 30 years experience in financial markets. He co-founded Incredible Charts and writes the popular Trading Diary newsletter.
Colin also writes The Patient Investor newsletter which focuses on the global economic outlook and key macro trends.
In addition, he founded PVT Capital (AFSL No. 546090) which offers investment strategy and advice to wholesale clients.