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.
✳️ Pattern Formation
- Forms after a sustained downtrend, as selling momentum weakens
- Structure completes when price tests support twice and breaks neckline resistance
- Commonly develops during accumulation phases or oversold zones
🔷 Characteristics
- Two distinct lows near the same price level form the double bottom
- A peak between troughs acts as resistance (neckline)
- Volume often increases during the second bottom and breakout
- The pattern confirms only when price breaks above the neckline
🌐 Market Condition
- Suitable for equity markets, indices, and forex pairs in oversold phases
- Best used in liquid instruments showing signs of trend exhaustion
🎯 Trading Strategy
- Entry Point: Buy when price breaks above the neckline with strong volume
- Stop-loss: Below the second bottom low to manage risk
- Target Price: Measure the distance from neckline to bottom and project it upward