Double bottom is a bullish pattern
A Double Bottom is a bullish pattern indicated by a W shape. The two bottoms will succeed, reflecting an important support (in green). This will mark a reversal testament. The pattern can also be in WV shape. We will discuss a triple bottom. By showing the double bottom below, the support area will allow price to recover twice. The first will determine the neckline (in red), illustrated by the high between the two bottoms. In addition, the price should come back to the support. The size of the two bottoms is often the same (as indicated below), but it may happen that the first bottom is lower than the first. This configuration strengthens the validity of the figure because it reflects a breathlessness in the selling movement. Another rebound will then occur, but the break of the neckline that will validate this bullish reversal. When the neckline breaks, it may happen that the price comes back to it (this line then becomes support) and then increases again. The possibility of increase is determined by the difference between the starting support and the neckline. Here are some statistical facts about double bottoms: – In 70% of cases, a bullish reversal occurs; – In 67% of cases, the pattern is reached once the neckline is broken; – In 59% of cases, a pullback occurs; – In 97% of cases, there is a pursuit of the move once the neckline is broken. They are several types of double bottoms that are differentiated according to two criteria. The shape of the bottom can be a V-shape (known as an Adam bottom) or a U-shape (called an Eve Bottom). The second bottom can be higher, perhaps the same or lower than the first bottom. When retracing, the upward movement will not be as important once the target of the pattern is reached. More the two bottoms are close, more the percentage of success of the pattern is crucial. The bearish movement that precedes the formation of the double bottom is important, more the upward movement at the breakout of the neckline will be powerful.
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