Double Bottom

What Is a Double Bottom?

A double bottom is a bullish reversal pattern that forms when price declines to a support level, bounces, pulls back to approximately the same level, and bounces again. The resulting "W" shape signals that sellers have twice failed to push price below support, and that buying interest at that level is strong enough to fuel a reversal.

The double bottom is the bullish counterpart of the double top. The two troughs define the support level, and the peak between them forms the neckline. The pattern is confirmed when price breaks above the neckline after the second trough.

How Traders Trade the Double Bottom

The conservative entry is on the neckline breakout, which confirms that the pattern has completed and the reversal is underway. The stop loss goes below the second trough, and the target is the trough-to-neckline distance projected upward. This method offers clear entry, stop, and target levels.

The aggressive entry is near the second trough, based on recognition of the potential pattern forming. Traders using this approach look for additional confirmation at the trough: bullish candlestick patterns, RSI divergence (price at a similar low but RSI at a higher low), or increasing volume on the bounce. The risk is that the pattern may fail and support may break.

Volume patterns are important. The bounce from the second trough should show stronger volume than the first bounce, indicating that buying conviction is growing. The neckline breakout should be accompanied by a notable volume increase.

Context and Reliability

Double bottoms are most reliable when they form after extended downtrends at significant support zones. A double bottom at a multi-year support level carries far more weight than one at a minor intraday level. The pattern's significance also increases when the two troughs are separated by at least a few weeks, allowing sufficient time for the market to demonstrate that the support level is genuine.

A slight variation where the second trough is higher than the first is often considered a stronger signal, as it shows buyers willing to step in at a higher price, indicating growing demand.