Reversal Chart Pattern: Double Bottoms
Double bottoms or double valleys are the opposite of double tops. This double bottoms pattern becomes a trend reversal pattern bullish. This often marks the end of the descending trend and is likely to be the beginning of a long uptrend. This pattern consists of two valleys or successive drops that bounce from the support level at approximately the same level, with a peak separating between two valleys. Similar to the valley in the double tops pattern, the high level at the peak that lies between the two valleys is very important for the purpose of price projection and the two forms of dropping valley is very important. Then, the volume is also important to note, with the ideal pattern having a lower volume on the second (valleys) decline than the volume at the first decrease.
As with double tops, double bottoms patterns can also create a third valley and evolve into triple bottoms patterns.
Double bottoms pattern gives two signal entries to make a buy. The first signal, when the price failed to break the previous support level in the second (valley formation). The second signal is when the resistance level formed at the peak between the two valleys can be penetrated by the price. Well, this last signal is a more reliable signal from the first signal. And will become more reliable when the breakout motion is accompanied by an increase in volume.
The price projection for the double bottoms pattern can be calculated by taking the distance between the resistance level from the high level at the peak to the low of the two drops (valleys) and adding it to the point where the resistance level is broken by the price. The price may come back to retest the previous resistance level, which will now be the support level (after penetration) and may even break through this level before the up trend starts to take effect. If the support level is broken on a strong volume, you should be cautious and may be an indication of exit from trading and re-entry when the price breaks back above this level.