Technical Analysis of Double Bottoms Chart Patterns

How to Interpret Double Bottoms Chart Patterns

To learn how to analyze the market using double bottoms stock chart patterns a trader should first of all learn the technical analysis of double bottoms stock chart pattern explained in this tutorial.

Double Bottoms Chart Pattern

Double bottoms pattern is a reversal stock indices pattern which forms after an extended downwards trend.

Double bottoms stock chart pattern is made up of two consecutive troughs which are roughly equal, with a moderate peak between the 2 troughs.

Double bottoms stock chart patterns formation is considered complete once stock price makes the second low & then penetrates the highest point between the lows, called the neck line.

The buy signal from this double bottoms market bottoming out signal occurs when the market breaks-out the neckline to the upside.

In Indices, the double bottom stock indices pattern is an early warning signal that the bearish trend is about to reverse.

Double Bottoms Chart Pattern is only considered complete/confirmed once the neckline is broken. In this double bottoms stock chart patterns formation the neckline is the resistance level for the price. Once this resistance is broken the market will move up.

Summary:

• Double bottom stock chart pattern forms after an extended move downwards - indices downwards trend
• This Double bottoms stock chart pattern formation shows that there will be a reversal in stock market
• We buy when stock price breaks out above neck-line: as described on the example explained below.

Technical Analysis of Double Bottom Patterns?

The double bottom stock indices pattern look like a W Shape stock chart pattern, the best reversal signal is where second bottom is higher than the first bottom as illustrated & shown below.

This means that the reversal stock indices signal from the double bottom stock chart pattern can be confirmed by drawing an upwards trendline as shown below. If a trader opens a buy signal the stop loss will be placed just below this up-wards trendline.

How to Interpret Double Bottoms Chart Patterns