Double Bottom
Key Takeaways
- 01.Two distinct lows at a similar price level, separated by an intervening peak (the neckline).
- 02.It signals that sellers failed twice to push price lower — a shift of control toward buyers.
- 03.Confirmation is a close above the neckline, not merely the second bounce.
- 04.The measured target is roughly the pattern's height projected upward from the neckline.
Why it matters
The double bottom is one of the most widely watched reversal structures, so its neckline often becomes a self-reinforcing decision level: many participants act on the same breakout, which can add follow-through. It also gives a clear, rule-based way to define invalidation — below the lows — which makes risk easy to frame.
When it matters
It is most meaningful after a sustained downtrend, where a genuine reversal has something to reverse. The same shape appearing inside a choppy, directionless range carries far less weight, because there is no prior trend for it to turn.
Two lows at a shared support level with an intervening peak; the dashed neckline drawn across that peak marks the confirmation level.
Open a live chart and draw the neckline across the intervening peak to see confirmation in context.
Common Mistakes
Acting on the second bounce instead of the breakout
The pattern is not confirmed until price closes above the neckline. Entering on the second low — before confirmation — treats an unformed pattern as a completed one, and many such setups simply resume the downtrend.
Ignoring the preceding trend
A double bottom is a reversal pattern, so it needs a prior downtrend to reverse. The identical shape inside a sideways range is far weaker and is frequently mistaken for a high-probability signal.
Demanding the two lows match exactly
The lows rarely print at the identical price. A small difference between them is normal; insisting on a perfect match causes valid patterns to be discarded.
📖 Real-World Example: A textbook 'W' off a major low
Broad market indices during the 2020 recovery traced a clear double bottom: an initial low, a rebound to a neckline, a retest near the first low, and then a decisive close above the neckline that preceded the extended advance. It illustrates the sequence — two lows, a neckline, and confirmation by breakout — without relying on any single stock.