Double Bottom (W)

The Double Bottom is the bullish mirror image of the double top, signaling a potential reversal of a downtrend. Key features:

• Two lows at roughly the same level, separated by a rally.
• A neckline (resistance) formed at the peak of the intervening rally.
• Volume often declines on the second low and increases on breakout.
• Confirmation comes when price closes above the neckline with volume.

Visually, it resembles the letter W, with two troughs and a breakout above resistance.

The double bottom reflects seller exhaustion and buyer resurgence:

• The first trough forms as sellers push price down aggressively.
• A relief rally occurs, but bears reassert control, dragging price back toward prior lows.
• At the second trough, selling pressure diminishes — bears can’t drive significantly lower.
• Buyers sense value and step in more strongly, sparking demand.
• Breakout above the neckline confirms control has shifted to bulls.

Bulkowski’s research shows the double bottom to be a solid bullish reversal:

• Upward break frequency: ~65%.
• Failure rate: ~16% (price falls back below lows).
• Average rise after breakout: ~35%.
• Throwback (retest of neckline): ~64%.
• Target met rate: ~66%.

Reliability increases when the two troughs are spaced apart (weeks/months), and when volume is heavier on the breakout than at the bottoms.

Entry: Buy when price breaks above neckline. Aggressive traders may enter on confirmation of the second low with tight stops.

Stop loss: Below the second trough (conservative) or just under neckline (aggressive).

Targets: Minimum = distance from neckline to trough projected upward. Secondary = prior resistance zones.

Invalidation: Breakdown below the second trough invalidates the reversal.

• Premature entries: Many traders enter before neckline breakout, risking false reversals.
• Volume importance: Weak breakout volume reduces success odds.
• Retests: Neckline retests are common and can shake out early buyers.
• Deep second troughs: If the second trough is much deeper, it may signal continuation, not reversal.
• Time separation: Short gaps between lows reduce pattern validity.

• If neckline resistance is extremely strong (multiple failed tests historically).
• If broader market trend remains bearish.
• If troughs are uneven or too close together.
• If no volume expansion occurs on breakout.