What Is a Double Bottom?
Following downtrend, price falls to a low, rebounds to resistance, falls again near the first low, then advances. Two lows mark demand at support. Peak between lows is neckline. Break above neckline confirms buyers control. W-bottom is synonymous in many texts. Measured move adds peak-to-low depth to breakout. Double bottoms rank among the most watched patterns because support is objectively defined twice. Quality improves when second low holds on lighter volume.
Time between lows should allow distinct middle rally—same-session double taps are less reliable on dailies.
How Do You Validate the Formation?
Two lows at similar price—horizontal support zone. Middle peak clear for neckline. Prior downtrend provides context. Second low not materially lower than first. Volume pattern: climax possible on first low, drying on second, expansion on break. Ascending neckline from higher middle peak is bullish nuance. Avoid labeling every bounce as double bottom in grinding bear markets without break confirmation.
Fundamental catalyst at second low—insider buying, sector turn—can fuel valid breakouts.
What Confirms the Neckline Breakout?
Close above neckline on volume above twenty-day average. Hold above neckline on first pullback. RSI above 50 on break supports momentum. Gap breakout valid if does not fill completely back below neckline. Early entry at second low with stop below is anticipatory—lower probability. Breakout bar range and close location matter—close near high shows conviction.
Multiple failed breaks at neckline suggest overhead supply—wait for volume surge or skip.
Align neckline level with visible horizontal resistance on higher timeframes—multi-timeframe confluence reduces false breaks at obvious prior highs.
Where Do Stops and Targets Go?
Stop below second low or support zone. Target adds neckline-to-low distance to breakout. Scale partial at one measured move; trail remainder. Retest buy at neckline reduces chase risk. Position size from stop distance. If breakout runs into 200-day moving average overhead, plan partial earlier.
Log time from second low to break—overly long bases sometimes break false on first attempt.
What Causes Double Bottoms to Fail?
Second low breaks down—waterfall continues. Low-volume breakout fades to new low. Bear market relief rally fails at neckline repeatedly. Confusion with descending triangle—flat support with lower highs is different pattern. News gap through support invalidates before break. Close back below neckline after breakout—exit longs. Do not average down on failed break.
Adam and Eve bottom variant—first low sharp, second rounded—still needs neckline break to confirm.
Pair double-bottom scans with improving relative strength versus the index to avoid value traps in persistent downtrends.