Doble Bottom

A W-shaped formation where price tests a support level twice at nearly the same level but fails to break lower. This pattern signals a potential trend reversal from a downtrend to an uptrend. It forms after a prolonged bearish trend, and a breakout above the middle peak resistance confirms the bullish reversal.

Significance

• Suggests strong support at a key level, preventing further price decline.
• Indicates buyers are stepping in, absorbing selling pressure and preparing for an uptrend.
• A breakout above the middle peak confirms the trend reversal, signalling buying momentum.

Characteristics

• Two equal or near-equal lows testing the same support level.
• The middle peak (between the two lows) acts as resistance; a breakout confirms the pattern.
• Volume typically declines during formation and rises significantly at breakout.

Market Condition

• Forms after a prolonged downtrend, suggesting a shift in market sentiment.
• More effective when combined with indicators like RSI divergence or MACD bullish crossover.

Trading Strategy

• Entry point – Buy when price breaks above the middle peak (resistance level) with strong volume.
• Stop-loss – Below the second low to protect against false breakouts.
• Target price – Measure the pattern height (distance from the lows to the middle peak) and add it to the breakout level.