Double Bottom
Definition
A bullish reversal pattern formed by two consecutive troughs at roughly the same price level, creating a "W" shape on the chart. It signals that sellers have failed twice to push price lower and buyers are taking control.
Example
“"That double bottom on the daily chart was textbook — both lows held the same support zone and the second bounce came on heavier volume."”
Detailed Explanation
The double bottom is one of the most reliable reversal patterns in technical analysis. It forms after a downtrend when price falls to a support level, bounces, pulls back to test that same support a second time, and then bounces again. The two troughs don't need to be perfectly equal — within a few percent is close enough. What matters is that sellers could not break through on the second attempt.
The pattern is confirmed only when price closes above the neckline — the high point between the two troughs. Many traders make the mistake of entering at the second low before confirmation, only to watch the pattern fail. Waiting for the neckline break adds reliability, though it means giving up some of the move.
Volume is the key qualifier. Ideally, volume contracts during the second trough (sellers losing conviction) and then expands sharply on the neckline breakout (buyers committed). A breakout on low volume is suspect. A breakout that stalls immediately after clearing the neckline should put you on alert for a failed pattern.
The classic price target is the distance from the neckline to the bottom of the troughs, projected upward from the breakout point. In practice, experienced traders scale out along the way rather than holding for the full measured move. Double bottoms on higher time frames (daily, weekly) carry more weight than those on intraday charts.