What is Double Bottom?
A double bottom is a bullish reversal pattern where the price drops to approximately the same low twice with a moderate rally in between, forming a 'W' shape that signals selling exhaustion.
Double Bottom Explained
The double bottom shows that sellers tried and failed twice to push below the same support level. The pattern is confirmed when the price breaks above the middle peak (the 'bounce' between the two lows). The price target is the height of the pattern projected upward from the breakout point. This pattern often forms at market bottoms.
Real-World Example
A stock drops to $40, bounces to $48, drops back to $41, then rallies. When it breaks above $48 on volume, the double bottom is confirmed. Target: $48 + ($48 - $40) = $56. A trader buys at $49 with a stop at $46.
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