Similar to the double top, the double bottom is a reversal pattern too.
While the double tops are happening after an uptrend, double bottoms are popular reversal formation in a downtrend.
Without going further ado, let us introduce you to double bottom chart pattern:
In order to have a valid double bottom, we need a downtrend.
After falling for a certain amount of time, it found support and created the first low.
That low could form at any random price, but if it forms in the area of the previous interest from the past, the probability of working out is way higher.
The support is an area where buying interest is expected.
By forming first low, it confirms that the area is still making a significant impact on the price action.
The first low is a result of impatient buyers who are afraid of missing this trade.
Once the low is established, we see some kind of pullback caused by early buyers.
Once there are no more buyers, the price starts falling again approaching the area of potential support again.
If it gets broken, we can start looking for other chart patterns because the double bottom is not going to form.
On the other side, if the price builds second low and starts going up approaching the area of the neckline (resistance), we have a solid chance of seeing the double bottom.
The lows (bottoms) don’t have to be formed at an equal price.
It is enough to see them forming in an area around a certain price level.
If the second low is higher than the first one, it is a good sign since it didn’t drop to test support.
It gives us reason to believe that buyers started buying earlier anticipating support to hold out.
Milos is an independent trader, with a background in journalism and publishing. Nomadic by nature, he’s lived in four different countries this decade. He’s fascinated by Blockchain technologies’ potential to reshape all aspects of our lives. Milos got into Bitcoin while completing his degree and hasn’t looked back since, writing about anything crypto-related. He is the co-founder of the Cryptoaims and he has a strong passion to educate people about this revolutionary technology.