Chart Pattern #3: Double Bottom
Have you ever had anything so good that you had to come back for seconds?
That’s what happens with a double bottom chart pattern.
It means the bulls in the marketplace have gotten a taste for the end of the bear market and are ready to get seconds.
What is a Double Bottom?
Since a double top is a reversal of the bull market, a double bottom is a technical indicator that signifies the reversal of a bear market. It involves the drop of an asset at its lowest price followed by a quick uptick then back down to its initial drop in price.
So it’s two inverted peaks separated by a valley (support level).
And it also looks like a “W.”
That could mean a win for you if you play your cards right.
Why is that important?
Most trading nerds or technical analysts believe double bottoms could signal a downtrend and reversal of a bear market.
If you position yourself right, you can catch the tails of this reversal and ride the uptick for some serious gains.
How to Trade a Double Bottom
However, a double bottom could be a false alarm. The trading nerds… sorry, technical analysts, recommend you look for at least a 10 percent drop or more in the asset.
Sometimes the identical price points of the inverted peaks can go as low as 30 percent! That’s not a bad discount at all.
If you see a double bottom with a decline of 2 to 3 percent in the inverted peaks, you’d be fine to turn your nose away.
This is like folding when you think you have a bad hand and don’t want to risk playing with one.
This is just the criteria and recommendation. It’s not necessarily doing the math to get the right answer every time.
The Risks Involved
A double bottom, much like a double top, can be hard to confirm if you’re not adept at technical analysis.
It also requires incredible patience as the start of a potential upswing can take months from its initial drop in price point.
For example, traders who bought PotBelly when it tanked 60% percent to $2 in March had to wait until July before the upswing broke the support level at $4.
Those that stuck to their trading strategy and confirmed the decline of the inverted peaks made out pretty well.
And you can too once you join the Big Energy Profits Family for a free training on price and volume.