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The classic "W" formation - a powerful reversal pattern where price tests a support level twice and fails to break lower, signaling the end of a downtrend.
The Double Bottom is a major bullish reversal chart pattern that resembles the letter "W". It forms when price makes two consecutive lows at approximately the same level, with a moderate peak (the "neckline") in between.
The pattern signals that sellers attempted to push price lower twice but failed both times at the same support level. This double rejection shows that buyers are stepping in at that level, and a breakout above the neckline confirms the reversal.
The Double Bottom represents a dramatic shift in market psychology. After a downtrend, price reaches a low where buyers step in - this creates the first bottom. The subsequent rally fails at resistance (the neckline), and sellers push price back down.
Here's where it gets interesting: price returns to the same support level, but this time the selling pressure is weaker. Buyers who missed the first bounce are now waiting. When price fails to make a new low, it signals seller exhaustion.
The breakout above the neckline is the *moment of truth*. Shorts cover their positions, sidelined bulls jump in, and the previous resistance now becomes support. This combination creates the powerful move that typically follows a confirmed Double Bottom.
Conservative: Enter on a close above the neckline with volume confirmation.
Aggressive: Enter on the retest of the neckline as support after initial breakout.
Place stop below the lower of the two bottoms. This is where the pattern is completely invalidated - if price makes a new low, the double bottom failed.
Measured Move: Project the height of the pattern (neckline to bottoms) upward from the breakout point. Alternative: Use prior resistance levels and Fibonacci extensions.
Double bottoms typically offer 1:2 to 1:3 R:R based on the measured move target.
The Double Bottom is one of the most traded reversal patterns, but its success rate varies dramatically based on context. The quality of the prior downtrend, the depth and spacing of the two troughs, and the volume profile all determine whether it leads to a genuine reversal or a failed bounce.
A double bottom with a higher second low (W pattern) is actually stronger than two equal lows - it shows buying pressure increasing.
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