Double bottom forex

The Double Bottom Reversal is a bullish reversal pattern typically found on bar charts, line charts and candlestick charts. As its name implies, the forex is made up of two consecutive troughs that are roughly equal, with a moderate peak in-between. Although there can be variations, the classic Double Bottom Reversal usually marks an intermediate or long-term change in trend.

Many potential Double Bottom Reversals can form along the way down, but until key resistance is broken, a reversal cannot be confirmed. To help clarify, we will look at the key points in the formation and then walk through an example. It is important to remember that the Double Bottom Reversal is an intermediate to long-term reversal pattern that will not form in a few days. Even bottom formation in a few weeks is possible, it is preferable to have at least 4 weeks between lows.

Bottoms usually take longer than tops to form and patience can often be a virtue. Give the pattern time to develop and look for the proper clues. Just as with the double top, it is paramount to wait for the resistance breakout. The formation is not complete until the previous reaction high is taken out. After bottom lower for almost a year, PFE formed a Double Bottom Reversal and broke resistance with an expansion in volume.

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The information provided by StockCharts. Trading and investing in financial markets involves risk. You are responsible for your own investment decisions. Log In Sign Up Help. Free Charts ChartSchool Bottom Webinars Members. Forex Bottom Reversal The Double Bottom Reversal is a double reversal pattern typically found on bar charts, line charts and candlestick charts. With any reversal pattern, there must be an existing trend to reverse.

In the case of the Double Bottom Reversal, a significant downtrend of several months should be in place. The first trough should forex the lowest point of the current trend.

As double, the first trough is fairly normal in appearance and the downtrend remains firmly in place. Volume on the advance from the first trough is usually inconsequential, but an increase could signal early accumulation. The high of the peak is sometimes rounded or drawn out a bit from the hesitation to go back down. This hesitation indicates forex demand is increasing, but still not strong enough for a breakout. The decline off the reaction high usually occurs with low volume and meets support from the previous double. Support from the previous low should be expected.

Even after establishing support, only the possibility of a Double Bottom Reversal exists, and it still needs to be confirmed. The time period between troughs can vary from a few weeks to many months, bottom the norm being months. Volume is more important for the Double Bottom Reversal than the double top. There should clear evidence that volume and buying pressure are accelerating during the advance off of the second trough.

An accelerated ascent, perhaps marked with a gap or two, also indicates double potential change in sentiment. Even after trading up to resistance, the double top and trend reversal are still not complete. Breaking resistance from the highest point between the troughs completes the Double Bottom Reversal. Broken resistance bottom potential support and there is sometimes a test of this newfound support level with the first correction.

Such a test can offer a second chance to close a short position or initiate a long. The distance double the resistance breakout to bottom lows can be added on top of the resistance break to estimate a target. This would imply that the bigger the formation is, the larger the potential advance. From a high near 50 in April, PFE declined to 30 in November, which was a new week low. Volume expanded and the Jan advance green arrow occurred on the highest volume since 5-Nov.

After a short pullback, there was another attempt to forex above resistance, but this failed. Even so, volume on advancing days was generally higher than on declining days. The ability of the stock to remain in the mid-thirties for an extended period of time indicated some strengthening in demand. The second trough formed with a low exactly equal to the previous low 30 and a little over 2 months separated the lows. The advance off of the second low witnessed an accelerated move with an expansion of volume.

After the second low at 30, 5 of the next 6 advancing days forex volume well above the day SMA. There was a brief chance to get in on the pullback and the stock quickly advanced past Sign up for our FREE twice-monthly ChartWatchers Newsletter!

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