Is a Double Bottom Chart Pattern Bullish or Bearish?
A double bottom chart pattern has a W shape and it occurs at a market bottom therefore its name double bottom chart pattern and it signals a bullish price reversal in the market.
Once a double bottom chart pattern is confirmed then the market will be regarded to be bullish, henceforth a double bottoms is bullish.
Double Bottom Pattern
Double bottoms pattern setup is a reversal pattern which forms after an extended downwards trend. Double bottoms stock trading chart pattern is made up of two consecutive troughs that are roughly equal, with a moderate peak in between.
This double bottom chart pattern formation is considered complete once trading price makes second low and then penetrates highest point between lows, called the neck-line. The buy indication from this bottoming out signal occurs when market breaks-out the neck line to the upside.
In Indices, this double bottom setup formation is an early warning signal that the bearish trend is about to reverse. It's only considered complete/confirmed once the neck-line is broken. In this double bottoms chart pattern formation the neck line is the resistance level for the price. Once this resistance level is broken the market will move up.
Summary:
- Double bottom pattern setup forms after an extended move downwards
- This Double bottoms chart pattern formation shows that there'll be a reversal in market
- We buy when the price breaks above the neck line point: see below for explanation.
Is a Double Bottom Chart Pattern Bullish or Bearish?
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