Double Bottom Pattern

13 min read

Signal: Bullish | Reliability: High | Volume Confirmation: Required | Market Conditions: Works best in trending and bottoming markets

Double Bottom is one of the most reliable and widely recognized reversal patterns in technical analysis. This bullish formation signals the potential end of a downtrend through the creation of two distinct lows at approximately the same price level, separated by an intermediate peak that forms the neckline. The pattern demonstrates exhaustion of selling pressure and the emergence of buying support, making it a powerful tool for identifying major trend reversals. Its reliability stems from its representation of failed attempts to push prices lower, combined with increasing buying interest that eventually overwhelms selling pressure and drives prices higher.

What is Double Bottom? #

Double Bottom is a bullish reversal pattern that forms when price creates two distinct lows at approximately the same level after a significant downtrend, with an intermediate peak between them forming a resistance line (neckline). The pattern represents a shift in market sentiment from bearish to bullish, where sellers lose conviction and buyers gain control. When price breaks above the neckline with volume confirmation, it signals a high-probability reversal from the established downtrend to a new uptrend.

The pattern reflects a fundamental change in supply and demand dynamics where each test of the low brings in more buying interest while reducing selling pressure. The first low represents initial exhaustion of the downtrend, while the second low confirms that bears cannot push prices meaningfully lower despite renewed selling attempts. The beauty of Double Bottom lies in its clear visual representation of trend exhaustion and reversal, providing traders with well-defined entry points, stop-loss levels, and profit targets.

Key Uses: #

Trend Reversal Identification: Signal the end of downtrends with high reliability
Bottom Recognition: Identify major and intermediate market bottoms
Entry/Exit Timing: Clear breakout signals for optimal trade execution
Risk Management: Natural stop-loss placement below pattern lows
Target Calculation: Reliable measurement for profit objectives using pattern height
Accumulation Detection: Recognize institutional buying and smart money accumulation

Double Bottom Anatomy #

Pattern Components: #

First Bottom (Left Low):

Initial low following significant downtrend
Often accompanied by high selling volume
Represents preliminary exhaustion of downtrend
May show initial signs of buying interest
Sets the floor level for pattern formation

Neckline (Intermediate Peak):

Rally from first bottom creating resistance level
Forms the upper boundary of the pattern
Breakout point for pattern completion
Volume should be moderate during formation
Height determines measured move target

Second Bottom (Right Low):

Second test of the low established by first bottom
Should be at approximately same level (within 3-4%)
Critical volume analysis point for pattern validation
Often shows stronger buying support than first bottom
Confirms inability of bears to drive prices lower

Neckline Breakout:

Decisive move above the intermediate peak
Must be accompanied by significant volume expansion
Triggers pattern completion and measured move
Often followed by pullback to test neckline as support

Volume Pattern Characteristics: #

First Bottom Volume:

Usually high volume as selling climaxes
May represent capitulation or institutional selling
Sets baseline for volume comparison
Often marks panic selling or forced liquidation

Rally to Neckline Volume:

Moderate volume during initial recovery
Should show some buying interest
Not necessarily high but should be consistent
Indicates initial shift in sentiment

Second Bottom Volume:

Critical analysis point for pattern validity
Should be lower than first bottom volume
Indicates diminishing selling pressure
Higher volume may suggest strong buying support

Breakout Volume:

Must show significant expansion (2-3x average)
Should exceed volume at both bottoms
Confirms institutional participation in reversal
Sustained high volume validates pattern completion

Pattern Psychology: #

First Bottom Formation:

Extended downtrend reaches exhaustion point
Panic selling or forced liquidation occurs
Value buyers begin to emerge at low prices
Initial support level established

Rally Phase:

Short covering and bargain hunting drive rally
Sellers become less aggressive
Resistance forms at neckline from previous support
Market tests resolve of new buyers

Second Bottom Test:

Renewed selling pressure tests low again
Critical juncture for pattern development
Failure to break below first low shows support
Buying interest typically stronger than first test

Breakout Phase:

Neckline break triggers technical buying
Trend followers enter on reversal signal
Short covering accelerates upward move
Pattern completion attracts institutional buyers

Types of Double Bottom Patterns #

1. Classic Double Bottom #

Characteristics:

Two lows within 3-4% of each other
Clear neckline formed by intermediate peak
Minimum 4-week formation period
Proper volume characteristics throughout

Identification Rules:

Both lows should be at similar levels
Neckline should be clearly defined
Volume must decline on second bottom
Breakout requires volume confirmation

2. Adam & Adam Double Bottom #

Characteristics:

Both bottoms have sharp, V-shaped reversals
Quick, spike-like lows with immediate recovery
High volume on both bottoms
Often more reliable than other variations

Key Points:

Sharp reversals indicate strong buying interest
High volume confirms significant support
Often leads to explosive breakout moves
Most recognizable form of double bottom

3. Adam & Eve Double Bottom #

Characteristics:

First bottom sharp (Adam), second bottom rounded (Eve)
Different volume characteristics at each bottom
Mixed formation showing different buying patterns
Requires careful volume analysis

Analysis:

Sharp first bottom shows initial support
Rounded second bottom shows building accumulation
Volume patterns may vary between bottoms
Still valid if overall criteria met

4. Eve & Adam Double Bottom #

Characteristics:

First bottom rounded (Eve), second bottom sharp (Adam)
Gradual accumulation followed by decisive support
Strong buying emerges on second test
Often very reliable formation

Components:

Rounded First Bottom: Gradual accumulation phase
Sharp Second Bottom: Decisive rejection of lower prices
Volume Acceleration: Increasing buying interest
Strong Breakout: Often explosive continuation

5. Eve & Eve Double Bottom #

Characteristics:

Both bottoms have rounded, saucer-like shapes
Extended formation periods
Gradual accumulation throughout pattern
Often marks major long-term bottoms

Analysis:

Shows sustained institutional accumulation
Longer formation periods increase reliability
Often coincides with fundamental improvements
May mark significant trend reversals

Trading Strategies #

1. Neckline Breakout Strategy #

Setup: Trade the break above neckline resistance

Entry Rules:

Wait for decisive close above neckline
Volume should be 2-3x recent average
Enter long on breakout or modest pullback

Stop Loss Placement:

Below the higher of the two bottoms
Below both bottoms for conservative approach
Use 2-3% maximum risk rule

Profit Targets:

Primary Target: Pattern height added to neckline break
Secondary Target: Previous resistance levels above
Extended Target: 1.618 Fibonacci extension

2. Second Bottom Strategy #

Setup: Enter during formation of second bottom

Entry Criteria:

Price approaches level of first bottom
Volume declining compared to first bottom
Strong reversal signals at support level

Advantages:

Better risk-reward ratio than breakout entry
Earlier entry improves profit potential
Natural stop below both bottoms
Can build position during formation

Disadvantages:

Pattern not confirmed until breakout
Higher failure rate than breakout strategy
Requires active monitoring

3. Pullback After Breakout Strategy #

Setup: Enter on retest of broken neckline

Process:

Wait for initial breakout above neckline
Price pulls back to test neckline as support
Enter long on successful retest with volume

Benefits:

Confirmation of pattern validity
Better entry than chasing breakout
Clear stop below neckline support
Higher probability setup

4. Volume Divergence Strategy #

Setup: Focus on volume analysis for early signals

Volume Requirements:

Declining volume on second bottom
Volume expansion on any rallies
Early accumulation detection

Entry Rules:

Enter on volume divergence signals
Requires experience in volume interpretation
Exit if volume doesn’t support reversal

Volume Analysis in Double Bottom #

Volume Pattern Significance #

First Bottom Volume:

Usually represents selling climax
High volume indicates panic or forced selling
Sets baseline for comparison with second bottom
May show institutional distribution ending

Neckline Rally Volume:

Should show moderate but consistent buying
Volume doesn’t need to be extremely high
Indicates initial shift in sentiment
Building buying interest

Second Bottom Volume:

Must be lower than first bottom (critical requirement)
Shows diminishing selling pressure
Indicates sellers losing conviction
May show stronger buying support

Breakout Volume Requirements:

Volume should exceed both bottom formations
Minimum 2-3x recent average volume
Sustained high volume in following sessions
Confirms institutional participation

Volume Analysis Tools #

Comparative Volume Analysis:

Compare volumes at both bottoms
Measure breakout volume against formation
Track volume trends throughout pattern
Identify accumulation characteristics

Volume Indicators:

On-Balance Volume: Should trend upward through pattern
Accumulation/Distribution: Should show positive divergence
Volume Rate of Change: Measure expansion on breakout
Money Flow Index: Should improve through formation

Combining Double Bottom with Other Analysis #

Double Bottom + Moving Averages #

Trend Context:

Pattern should form below major moving averages
MAs often provide resistance during formation
Breakout above MAs confirms reversal
MA alignment should improve after breakout

Signal Enhancement:

Pattern formation near major MA support
Breakout triggers MA reclaim
Moving average crossovers confirm reversal
Price above all MAs validates trend change

Double Bottom + Support/Resistance Levels #

Level Confluence:

Pattern often forms at major support levels
Previous significant lows provide validation
Round numbers frequently floor the formation
Multiple timeframe support increases reliability

Enhanced Targeting:

Major resistance levels above provide targets
Previous highs offer profit objectives
Fibonacci levels provide additional targets
Gap fills may offer intermediate objectives

Double Bottom + Momentum Indicators #

RSI Analysis:

RSI should show positive divergence
Both bottoms with higher RSI lows
RSI above 50 on breakout confirms momentum
Oversold conditions at bottoms show exhaustion

MACD Confirmation:

MACD should show positive divergence
Bullish crossover often coincides with breakout
Histogram expansion confirms momentum
Signal line breaks validate reversal

Double Bottom + Fibonacci Analysis #

Retracement Levels:

Pattern often forms at 61.8% or 78.6% retracements
Golden ratio relationships enhance validity
Time-based Fibonacci can predict breakout timing
Multiple Fibonacci confluence increases reliability

Extension Levels:

Standard target equals pattern height projection
1.272 and 1.618 extensions provide additional targets
Fibonacci fans offer dynamic resistance levels
Cluster analysis identifies key target zones

Market Context Analysis #

Bear Market Double Bottoms #

Characteristics:

Extremely significant in bear market context
Often mark major or intermediate bottoms
High reliability for trend reversal
May signal broader market recovery

Trading Approach:

Use larger position sizes due to significance
Target extended moves beyond basic measurements
Monitor for broader market reversal signs
Consider sector rotation implications

Bull Market Double Bottoms #

Characteristics:

Usually mark intermediate corrections within uptrend
Shorter formation periods
Quick recovery to previous highs
Part of larger bull market structure

Trading Approach:

Use moderate position sizes
Target previous highs initially
Monitor for trend resumption
Combine with broader bull market analysis

Sideways Market Double Bottoms #

Characteristics:

Form at bottom of trading ranges
May signal range breakout or continuation
Often provide excellent risk-reward setups
Can mark transition to trending market

Trading Approach:

Target range resistance initially
Monitor for range breakout potential
Use range context for position sizing
Watch for false breakouts

Advanced Double Bottom Techniques #

Multiple Timeframe Analysis #

Strategy: Confirm pattern across timeframes

Higher Timeframe: Overall trend context and major support
Pattern Timeframe: Main pattern identification
Lower Timeframe: Precise entry timing and volume confirmation

Example Setup:

Weekly: Major downtrend showing exhaustion
Daily: Double bottom formation with proper volume
4-Hour: Entry timing on neckline break or second bottom
1-Hour: Volume confirmation and precise entry

Triple Bottom Recognition #

Evolution to Triple Bottom:

Failed double bottom may form third bottom
Third test often more decisive
Requires patience and proper analysis
Often more powerful when finally breaks

Trading Approach:

Monitor for third bottom formation
Each test should show improving volume characteristics
Triple bottoms often lead to explosive moves
Require extended patience but higher reliability

Failed Pattern Recognition #

Failure Signals:

Breakdown below both bottoms on high volume
Extended formation without neckline break
Volume expansion on declines within pattern
Broader market weakness overwhelming pattern

Trading Failed Patterns:

Exit long positions quickly on failure
Consider short opportunities on confirmed breakdown
Failed double bottoms often lead to significant declines
Re-evaluate market context and support levels

Double Bottom Measured Moves #

Standard Calculation:

Measure vertical distance from bottom to neckline
Add that distance to neckline breakout point
Provides minimum target expectation
Success rate approximately 70-80%

Alternative Calculations:

Pattern Width: Time-based projection methods
Fibonacci Extensions: 1.272 and 1.618 levels
Previous Resistance: Target major overhead levels
Trend Channel: Parallel projection methods

Common Double Bottom Mistakes #

Mistake 1: Ignoring Volume Requirements

Problem: Trading patterns without proper volume analysis
Solution: Always confirm declining volume on second bottom

Mistake 2: Premature Pattern Recognition

Problem: Identifying pattern before full formation
Solution: Wait for complete formation and neckline break

Mistake 3: Poor Entry Timing

Problem: Entering too early or chasing breakouts
Solution: Use systematic entry rules and patience

Mistake 4: Inadequate Risk Management

Problem: Not using proper stops or position sizing
Solution: Place stops below pattern lows, limit risk to 2-3%

Mistake 5: Wrong Market Context

Problem: Ignoring broader trend and market conditions
Solution: Consider overall market environment

Mistake 6: Unrealistic Expectations

Problem: Expecting immediate massive moves
Solution: Use proper target calculation and patience

Double Bottom Timeframe Guidelines #

Timeframe	Formation Duration	Reliability	Target Distance	Best For
Intraday	2-8 hours	Moderate	1-3%	Day trading
Daily	4-12 weeks	High	5-15%	Swing trading
Weekly	3-8 months	Very High	15-30%	Position trading
Monthly	8 months-2 years	Extremely High	30%+	Long-term investing

Pattern Optimization #

Reliability Factors:

Volume Divergence: Essential between bottoms
Time Duration: Longer formations more reliable
Market Context: Bear market formations most significant
Level Confluence: Multiple support levels increase validity
Clean Formation: Clear pattern structure without violations

Quality Checklist:

Two distinct bottoms within 3-4% of each other
Clear neckline formed by intermediate peak
Volume declining on second bottom
Minimum 4-week formation period
Clean pattern structure without major violations
Forms after significant downtrend
Breakout occurs with volume confirmation

Double Bottom vs. Other Patterns #

Double Bottom vs. Head and Shoulders Bottom #

Double Bottom:

Two equal lows with single peak
Simpler pattern structure
Measured move calculation
Generally shorter formation

Head and Shoulders Bottom:

Three lows with middle lowest
More complex pattern
Neckline may be sloped
Often longer formation periods

Double Bottom vs. Triple Bottom #

Double Bottom:

Two tests of support level
Quicker pattern development
Good reliability
Standard measured moves

Triple Bottom:

Three tests of support level
Longer formation period
Higher reliability when complete
Often more explosive breakouts

Double Bottom vs. Falling Wedge #

Double Bottom:

Horizontal support at bottoms
Reversal pattern
Volume declining on second bottom
Clear neckline break required

Falling Wedge:

Converging trendlines
Can be reversal or continuation
Volume declining throughout
Breakout above upper trendline

FAQs #

How reliable is the Double Bottom pattern?

Double Bottom patterns have approximately 70-80% success rate when properly identified with correct volume characteristics. Reliability increases significantly when patterns form after extended downtrends and show clear volume divergence between bottoms.

What’s the difference between Double Bottom and W-pattern?

Double Bottom and W-pattern refer to the same formation. The W-pattern name comes from the visual resemblance to the letter “W” when the pattern is complete.

How do you calculate Double Bottom price targets?

Measure the vertical height from the bottom of the pattern to the neckline, then add that distance above the neckline breakout point. This provides the minimum measured move target.

Can Double Bottom patterns fail?

Yes, approximately 20-30% of Double Bottom patterns fail when price breaks below both bottoms or fails to break the neckline. Failed patterns often lead to continued downtrends or sideways movement.

What volume pattern confirms a Double Bottom?

Volume must be lower on the second bottom compared to the first bottom, showing diminishing selling pressure. The neckline breakout should occur on volume 2-3x the recent average.

How long should a Double Bottom take to form?

For daily charts, reliable patterns typically take 4-12 weeks to complete. Shorter patterns have lower reliability, while longer patterns (3+ months) often mark major bottoms.

What’s the best entry point for Double Bottom patterns?

The most conservative entry is on a decisive close above the neckline with volume confirmation. Aggressive traders might enter near the second bottom, while patient traders wait for pullback retests.

Tips for Success #

Volume is Critical: Never trade double bottoms without proper volume analysis
Wait for Completion: Don’t anticipate; wait for neckline break confirmation
Context Matters: Strongest patterns form after extended downtrends
Patience Required: Allow full pattern development before acting
Proper Stops: Use stops below both bottoms with appropriate sizing
Multiple Targets: Use various calculation methods for exits
Watch for Failures: Be prepared to exit if pattern breaks down
Timeframe Confirmation: Check multiple timeframes for validation
Practice Recognition: Study historical examples to improve skills
Stay Disciplined: Follow entry and exit rules consistently

Conclusion #

Double Bottom stands as one of the most reliable and profitable reversal patterns in technical analysis, offering traders the ability to identify trend reversals at optimal points with excellent risk-reward ratios. Its clear structure and specific volume requirements make it particularly suitable for systematic trading approaches. The pattern’s strength lies in its representation of failed attempts to drive prices lower, combined with increasing buying interest that eventually overwhelms selling pressure.

The pattern’s effectiveness stems from its basis in market psychology, where two failed attempts to break support levels demonstrate trend exhaustion and reversal potential. When Double Bottoms form after extended downtrends with proper volume characteristics, they often mark significant bottom formations that lead to substantial upward moves. Success requires understanding the critical importance of volume analysis, proper pattern recognition, and patience to wait for complete formation.

Mastering Double Bottom patterns provides traders with a systematic approach to bottom fishing and trend reversal trading. By respecting the pattern’s formation requirements and understanding the underlying psychology of failed breakdowns, traders can position themselves advantageously for trend reversals and capitalize on one of technical analysis’s most reliable and time-tested reversal formations.

Remember: Double Bottom patterns represent the market’s rejection of lower prices through two failed attempts to break support. By recognizing these rejection characteristics and waiting for proper neckline breakout confirmation, traders can harness one of the market’s most reliable reversal patterns for consistent profit generation at major turning points.

Bullish Signals, High Reliability