Double Bottom

                  

#TermoftheDay - Double Bottom

Gopi Narayanaswamy says a double bottom is a charting pattern used in technical analysis. It describes the drop of a stock or index, a rebound, another top to the same or similar level as the original drop and finally another rebound.

Tushar Popat adds double bottom is one of the chart pattern used in Technical Analysis. Double Bottom happens in a down trend where in stock price reaches the support level 2 times and shoots up from there. The trend changes from down trend to up trend. It may also be called W pattern with two swing bottoms and one swing top. At double bottom most traders having short position squares it off and buying for longs starts.

Suresh Arcot confirms that double bottom is a bullish reversal pattern

Anand Priy says it is when stock touching same support level 2 times during downtrend and bouncing back.

Suresh Bhaskaran adds double bottom reversal is bullish reversal pattern. Double bottom consists of two bottom points and one high point in between (resembles letter "W" ). In a significantly long downtrend, the lowest level is considered as bottom1. It rebounds from that bottom1 and reaches an intermediate high point. Again it falls to level bottom2 which is almost the same level of bottom1. The second fall should be with less volume. It should rebound from that bottom2 level and should cross the high point (which is formed in between bottom1 and bottom2) with good volumes. Longer the duration between two bottom levels, better the chart pattern.

Prashant Patel adds that the Double Bottom Reversal is a bullish reversal pattern typically found on bar charts, line charts and candlestick charts. As its name implies, the pattern is made up of two consecutive troughs that are roughly equal, with a moderate peak in-between

Jaya Prakash Reddy further adds 

1. Double bottoms may not be traded blindly. We should get support from volumes also. After a double bottom is formed, observe the buyer’s volume % should be more by a good amount than the previous seller’s volume percentage. Then it may be a good signal.

2. Take support also from the RSI, Stochastic after a double bottom is formed.

3. If the second bottom pierces the first bottom but closes above the first bottom then chances are good for reversal.

Narendra Tank adds Double bottom means the share does not go below certain price level and it bounces off from that level

Vyas concludes by saying when stock bounces after coming from again to the same support level can be termed as Double Bottom

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