Double Bottom
A bullish technical indicator pattern, a double bottom identifies a potential reversal in a downward trend, where it forms when an asset price reaches a low two times in a row with a moderate increase between the two lows. A double top is the reversal of this pattern after an extended move upwards.
For instance, the price of the cryptocurrency falls to a certain level, bounces back up slightly, but then declines again, where the price reaches a similar low as the first bottom but does not fall significantly lower. This forms a ‘W’ shape of the pattern.
The pattern is confirmed when the price moves above the resistance level (the highest point between the two bottoms), which should be roughly at the same price level, indicating strong support. Ideally, volume should increase on the rise between the two bottoms, and particularly on the breakout above the resistance level.
The time between the two bottoms can vary, but a longer time frame often suggests a more reliable pattern.
Key Takeaway
A double bottom is a bullish technical indicator pattern that identifies a potential reversal in a downward trend, where it forms when an asset price reaches a low two times in a row with a moderate increase between the two lows.