Two lows alike, a W in shape:sellers twice failed to escape.
A bullish reversal chart pattern that forms after a downtrend, where price tests the same support level twice before breaking above the neckline resistance.
In plain words
A double bottom is a chart shape resembling the letter W: the price falls to a low, rebounds, falls again to about the same low and rebounds again. The high between the two lows is called the neckline. Chart readers treat the pattern as complete only when the price rises above the neckline.
See it move
Reached: Second low
Why it matters
It is read as showing that sellers twice failed to push the price lower, and so is said to indicate that a decline may be ending. Like every chart pattern it fails often: the price can drop through the two lows after appearing to form the shape.
Worked example
An example only. The figures are round and invented for the arithmetic: they are not market prices.
On an invented chart the price falls to 1.1000, rebounds to 1.1100, falls to 1.1005 and turns up again.
- 1Lows1.1000 and 1.1005, about the same level
- 2Neckline1.1100
- 3Height = 1.1100 − 1.1000 = 0.0100 = 100 pips
- 4The pattern is complete only above 1.1100
Until the price is above 1.1100 this is two lows inside a range, not yet a double bottom.
A common mistake
Two similar lows are often called a double bottom straight away. By the usual definition the pattern does not exist until the neckline is broken, and even then it can fail.
Check yourself
Educational information, not investment advice or a recommendation to trade.