The Double Bottom and Double Top are one of the most frequently seen price patterns.
Easy to recognize on the price chart.
Double Bottom
- Bullish reversal chart pattern
- Forms after an extended downtrend
- Also called a "W" formation
- Consists of 2 symmetrical troughs separated by a reaction high (neckline)
- 1st trough should be on increased volume at the lowest low of the current trend
- 2nd trough should be on declining volume
- Both troughs should ideally be at the same or slightly higher price level
- Both troughs should be symmetrical in terms of height and length in time
- High between the 2 troughs must be 10-20% advance of the 1st trough
- Breakout is confirmed on higher volume with a close above the neckline
- Projected price target is the height of the pattern (measure from the low to the neckline)
Double Top
- Bearish reversal chart pattern
- Forms after an extended uptrend
- Also called a "M" formation
- Consists of 2 symmetrical peaks separated by a reaction low (neckline)
- 1st peak should be on increased volume at the highest high of the current trend
- 2nd peak should be on declining volume
- Both peaks should ideally be at the same or slightly lower price level
- Both peaks should be symmetrical in terms of height and length in time
- Low between the 2 peaks must be 10-20% decline of the 1st peak
- Breakout is confirmed on higher volume with a close below the neckline
- Projected price target is the height of the pattern (measure from the high to the neckline)
