Double Bottom Pattern: How to Identify Double Bottom Patterns

In economics, the double bottom is the technical analysis of a change in trend that starts with a drop (in price action, stocks, or index) and then features a bump, then a second low, and finally, a more significant bump to signal, overall, an uptrend. This down-up-down-up pattern creates a “W” shape with the bottom of the two low points known as the support level. A double bottom formation marks a bullish trend, which will be good for the company’s stock and valuation. This pattern can give companies a better sense of the market over a medium-to-long time frame.

A double top pattern takes a predictable shape of a “W” and follows these trends:

1. 1. Bottom point: A first bottom point represents a drop in value of ten to twenty percent of the previous charted point on an index chart.
2. 2. Increase: Then, there will be a bump of about four percent.
3. 3. Bearish reversal: Following that bump, there will be another small bearish reversal, where the value drops again to about the same point as the first low. This provides companies with a predictable short-term price target.
4. 4. Bullish reversal: There will be a second and more significant bullish reversal from the previous low, where the value increases again, marking a breakout and an upward trend.

All companies will experience double top and bottom patterns as they grow and change, and together both technical indicators will play integral roles in pricing and trading strategies. Consider the differences between these trends:

• Impact: Double bottom patterns have two bottom points that hit a support level. This will signal an increase in stock and company values. Double tops, meanwhile, will have two tops that meet at the resistance level or neckline. These show an apex in value for that moment.
• Shape: A double bottom makes a “W” shape and marks an uptrend, while a double top makes an “M” shape and marks a downtrend.
• Trend: The double bottom chart pattern shows a downward trend, an upward trend, another downward trend, and another upward trend. A double top will have a steeper uptrend, a bearish reversal pattern, another uptrend to that resistance level, and a second steep downtrend.

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