Section: 6 Popular Charting Patterns

Sub Section: 6 Double Bottom

It occurs when a stock price drops to a similar price level twice within a few weeks or months, the double-bottom pattern resembles a “W". You should buy when the price passes the highest point in the handle. In a perfect double bottom, the second decline should normally go slightly lower than the first decline to create a shakeout of jittery investors. The middle point of the “W” should not go into new high ground. This is a very bullish indicator. The belief is that after two drops in the stock price the jittery investors are out and long-term investors are still holding on. The reverse of this pattern is called a “Double Top”. An example is illustrated graphically as follows: