Double Bottom / Top
Last updated
Last updated
The Double Bottom is the inverse of the Double Top and is a bullish reversal pattern. It forms after a downtrend and consists of two consecutive troughs that are approximately at the same price level, with a moderate peak in-between, forming a 'W' shape. The pattern is confirmed when the price rises above the "resistance level" (the highest point of the peak). This typically suggests that the asset's price is set to rise further, often at least the same vertical distance as the height between the double bottoms and the resistance level.
The Double Top is a bearish reversal pattern that forms after an uptrend. It consists of two consecutive peaks that are approximately at the same price level, with a moderate trough in-between, forming an 'M' shape. The pattern is confirmed when the price falls below the "support level" (the lowest point of the trough). This typically suggests that the asset's price is set to drop further, often at least the same vertical distance as the height between the double tops and the support level.
In both patterns, volume plays an important role. In the Double Top pattern, volume tends to decrease during the formation of the second top and increases when the price falls below the support level. In the Double Bottom pattern, volume usually decreases during the formation of the second bottom and increases when the price rises above the resistance level.
