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Double Bottom

Trading Term

A stock double bottom is a bullish reversal chart pattern that signals a potential shift from a downtrend to an uptrend. It occurs when the price of a stock falls to a certain level, rebounds, then declines again to roughly the same low, before rebounding once more. Visually, it resembles the shape of the letter “W” on a price chart.

  • Two Troughs: The two low points (bottoms) are formed at approximately the same price level, indicating a strong support zone.
  • Intervening Peak: The rally between the two troughs creates a temporary high, called the neckline.
  • Breakout Confirmation: The pattern is confirmed when the stock breaks above the neckline with increased volume, signaling a potential trend reversal.

This pattern is widely used in technical analysis to identify buying opportunities after a prolonged downtrend.

Chart of a stock double bottom pattern.

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