The double bottom is also a trend reversal formation, but this time we are looking to go long instead of short.
These formations occur after extended downtrends when two valleys or “bottoms” have been formed.
You can see from the chart above that after the previous downtrend, the price formed two valleys because it wasn’t able to go below a certain level.
Notice how the second bottom wasn’t able to significantly break the first bottom.
This is a sign that the selling pressure is about finished and that a reversal is about to occur.
Will you look at that!
The price broke the neckline and made a nice move up.
See how the price jumped by almost the same height as that of the double-bottom formation?
Remember, just like double tops, double bottoms are also trend reversal formations.
You’ll want to look for these after a strong downtrend.
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