Double bottom

What it is

A double bottom is the mirror of the double top. After a downtrend, price makes a low, bounces, falls back to about the same low, and holds a second time. The high of the bounce between the two lows is the resistance. The pattern completes when price closes above it.

Why it forms

The first low is where buyers finally outweighed sellers. The bounce draws in sellers who expect the downtrend to continue. When price returns to the same low and holds again, it shows the demand is still there — sellers could not break it on a second attempt.

A close above the bounce high means those who sold the rally are now wrong. Their buying to cover, together with new buyers, fuels the move.

How to identify it

• A clear downtrend before the first bottom.
• Two troughs at roughly the same price.
• A meaningful bounce between them.
• Enough time between the lows for the pattern to carry weight on its timeframe.
• Volume often rising on the rally from the second low toward resistance.

What confirms it

A candle close above the resistance set by the bounce high. Rising volume on the break adds conviction. A successful retest — price dips back to the old resistance and it holds as support — adds more.

What invalidates it

• Price closes below both bottoms.
• After the breakout, price closes back under the resistance and stays there.

Common mistakes

• Buying the second low blindly. The second test can just as easily break.
• Confusing a pause with a pattern. Two lows a few candles apart on a short timeframe carry little weight.
• No prior downtrend. Without something to reverse, it is just a range.
• Reading the measured move as a promise. It is a guide for scale only.