what does a double bottom tell you 
in technical analysis of financial markets a double bottom is significant in that it suggests an important low or strong level of support has been reached following a down move while the double bottom low remains in place price movement is likely to exhibit a retracement higher and possibly indicate the beginning of a new uptrend 2 by the same token a drop below the double bottom lows in subsequent periods suggests the downtrend is resuming and the bears have reasserted their primacy as with many chart patterns a double bottom pattern is best suited for analyzing the intermediate to longer term view of a market generally speaking the longer the duration between the two lows in the pattern the greater the probability that the chart pattern will be accurate it is for the reason above better to use daily or weekly data price charts when analyzing markets for this particular pattern the double bottom pattern always follows a major or minor down trend in a particular security and signals a reversal and the beginning of a potential uptrend the pattern should be validated by a change in market fundamentals for the security itself for example better earnings as well as the sector that the security belongs to and the market in general the fundamentals should reflect the characteristics of an upcoming reversal in market conditions also volume should be closely monitored during the formation of the pattern a spike in volume typically occurs during the two upward price movements in the pattern these spikes in volume are a strong indication of upward price pressure and serve as further confirmation of a true double bottom pattern once the closing price is in the second rebound and is approaching the high of the first rebound of the pattern in other words the middle of the w a noticeable expansion in volume is coupled with fundamentals that indicate market conditions are conducive to a reversal a long position should be taken on a daily close above the price level of the high of the first rebound with a stop loss at the second low in the pattern the minimum measured move objective for the pattern is the distance from the two lows to to the intermediate high in the middle of the pattern a more aggressive interpretation of the pattern suggests a target at two times the distance between the lows and the intermediate high example of a double bottomtradingviewthe daily trading chart above shows a double bottom in the case of an overall downtrend in advanced micro devices amd the first low is met by significant buying interest after a sudden sharp decline producing a long light candlestick and a bullish engulfing line if you re also using candlestick analysis those are both bullish reversal patterns the subsequent high is nearly 10 up from the first low suggesting investors should keep a sharp eye out for another downside move at this point as rebounds from the first low are typically on the order of 10 to 20 the second low of the pattern is within 3 to 4 of the prior low contributing to the validity of the pattern with the second bottom now in place traders should reckon with a potential correction higher or even a new uptrend as a level of significant support has been reached and tested twice the pattern is invalidated and downside potential resumes on a drop below the double bottom lows on the other hand a daily close above the intermediate high suggests a major reversal and perhaps the beginning of a new uptrend double bottom formations are highly effective when identified correctly however they can be extremely detrimental when they are interpreted incorrectly therefore one must be extremely careful and patient before jumping to conclusions the clue to watch for is another bottom around the earlier low followed by bullish confirmation in subsequent periods for example days or weeks such patterns are most readily visible on daily and weekly charts must the two bottoms of the lows in the double bottom pattern be the same no there is room to play with the relative levels of the lows though they should be within 3 to 4 of each other in fact if you think about it a higher second bottom suggests the selling pressure came to an earlier end indicating the low of the first bottom is a potentially highly significant support level that said it is perhaps surprising how many times the double bottom lows are identical adding great significance to the low price point as major support 