TA School

Double Bottom

Master the classic 'W-shaped' bullish reversal pattern that signals seller exhaustion at major support levels.

beginner level8 min read

Interactive Model

Interactive Visual Walkthrough

Double Bottom Reversal

Step 1 of 5
Downtrend & Bottom 1

A strong downward trend declines to a local support low at $91 (Bottom 1) before pulling back on short-covering.

Why it matters: This trough establishes the initial key support level where buyers are willing to step in.

What is a Double Bottom Pattern?

The Double BottomDouble BottomA bullish reversal chart pattern consisting of two consecutive troughs at approximately the same price level, separated by a peak (the neckline).Read full glossary entry → is a classic bullish reversal pattern that resembles the letter "W". It forms at the end of a downtrendDowntrendA market direction characterized by a sequence of lower highs and lower lows.Read full glossary entry → and signals that sellers are losing control, paving the way for a new uptrendUptrendA market direction characterized by a sequence of higher highs and higher lows.Read full glossary entry → to begin.

The structure is defined by two consecutive troughs at roughly the same price level, separated by an intermediate peak.

Pattern Structure

A valid Double BottomDouble BottomA bullish reversal chart pattern consisting of two consecutive troughs at approximately the same price level, separated by a peak (the neckline).Read full glossary entry → consists of:

  1. First Bottom: The price declines to a supportSupportA price level where buying pressure is strong enough to prevent the price from falling further. It represents a "floor" on the chart.Read full glossary entry → level, finds buyers, and bounces.
  2. Neckline / Peak: The highest point of the corrective bounce forms a resistanceResistanceA price level where selling pressure is strong enough to prevent the price from rising further. It represents a "ceiling" on the chart.Read full glossary entry → baseline called the Neckline.
  3. Second Bottom: The price declines again but holds supportSupportA price level where buying pressure is strong enough to prevent the price from falling further. It represents a "floor" on the chart.Read full glossary entry → at the previous low level before reversing back upwards.
  4. Neckline BreakoutBreakoutA price movement through an established support or resistance level. A breakout is often accompanied by increased volume, signaling strong momentum.Read full glossary entry →: The price breaks and closes above the neckline resistanceResistanceA price level where selling pressure is strong enough to prevent the price from rising further. It represents a "ceiling" on the chart.Read full glossary entry →.

Psychology Behind the Pattern

The psychology of a Double Bottom shows seller exhaustion at support:

  • First Bottom: Sellers push the price to a low. Buyers step in, causing a bounce.
  • Peak Resistance: Sellers defend the downtrendDowntrendA market direction characterized by a sequence of lower highs and lower lows.Read full glossary entry → at the peak.
  • Second Bottom: Sellers try to make a new low. However, buyers defend the previous support. Sellers fail to break below, and demand expands.
  • BreakoutBreakoutA price movement through an established support or resistance level. A breakout is often accompanied by increased volume, signaling strong momentum.Read full glossary entry →: The break above the neckline resistance confirms that buyers have seized control and the downtrend has officially reversed.

Identification Rules

  • Prior Downtrend: The pattern must follow an established downward move.
  • Trough Similarity: The two troughs should be at roughly the same price level (within 2-3%).
  • Neckline Break: Wait for a candle to close above the neckline resistance to confirm.
  • VolumeVolumeThe total number of shares, contracts, or units of a security traded during a specified time period.Read full glossary entry → Signature: VolumeVolumeThe total number of shares, contracts, or units of a security traded during a specified time period.Read full glossary entry → should expand on the neckline breakout.

Trading Setup

  • Entry: Buy long when a candle closes above the neckline, or on a pull-back retestRetestA price movement back to a previously broken support or resistance level to verify it holds as the opposite barrier.Read full glossary entry → of the broken neckline.
  • Stop-Loss: Place the stop-loss orderStop-Loss OrderAn order placed with a broker to sell an asset when it reaches a specific price, designed to limit a trader's loss on a position.Read full glossary entry → just below the bottoms (support zone).
  • Take Profit: Measure the vertical distance from the bottoms to the neckline, and project that same distance upwards from the breakout point.

Common Mistakes

[!WARNING]

  • Jumping the Gun: Buying at the second bottom before the neckline breakout occurs.
  • Sideways Consolidations: Trading the pattern in flat markets where support is repeatedly tested without an active trendTrendThe general direction in which a security or market is moving over time.Read full glossary entry →.
  • Ignoring Low Volume Breakouts: Buying a breakout on low volume, which has a higher risk of failing and returning below support.

Key Takeaways

  • •The Double Bottom is a bullish reversal pattern signaling the end of a downtrend.
  • •It consists of two consecutive troughs at roughly the same price level.
  • •The neckline is the horizontal resistance level drawn through the intermediate peak.
  • •Confirmation occurs only when the price breaks and closes above the neckline.
  • •The price target is calculated by projecting the height of the pattern upward from the breakout.
Knowledge CheckQuestion 1 of 5

What shape does a Double Bottom pattern resemble on a chart?

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