Double bottom

Family VI · Charts & indicators

Not to be confused with double top.

Double bottom is a reversal chart pattern that appears after a downtrend, consisting of two distinct troughs at roughly the same price level separated by a moderate peak. It is generally read as evidence that selling pressure has been absorbed at that level and that the trend may be turning upward. The pattern is only confirmed once price closes above the intervening peak, known as the neckline.

Structure and confirmation

A valid double bottom has four parts: the first trough, a rally to a local high (the neckline), a second trough that holds near the first low, and a breakout above the neckline. The two lows need not match to the tick; on most instruments they are treated as equivalent if they fall within a small percentage band, which varies by market and timeframe.

Confirmation is the neckline break, not the second low itself. A pattern that never clears the neckline remains an unconfirmed shape and can resolve into continued sideways or downward movement. Volume is often watched for expansion on the breakout, though this is a tendency rather than a requirement.

Worked example

The measured move is the neckline price plus the depth of the pattern. It is a projection, not a forecast, and is commonly used to set a profit objective or to judge whether the remaining reward justifies the risk of the trade.

Limitations

Double bottoms are subjective. Different analysts may disagree on whether the two lows are close enough, whether the intervening rally is large enough, or whether the pattern is still valid after a brief undershoot. In ranging markets the shape appears frequently and fails frequently, so many traders require additional evidence such as a trend change on a higher timeframe or a retest of the neckline that holds as support.

Often confused with

double top

A double top is the mirror image, formed by two peaks at roughly the same high after an uptrend and confirmed by a break below the intervening trough; the visible sign is whether the two extremes are highs (double top) or lows (double bottom).

See also

• forex technical analysis indicators
• price action
• fundamental analysis
• support and resistance
• technical analysis
• fibonacci