Experiencing a down trend that just seems like it will never recover can be depressing for any stock holder. It’s the ups and downs of the market that help technical analysts know what’s coming around the next bend, and when everything seems like its pointed downward, it can be hard to believe that there’s a price increase in store. Chart patterns are the tools that technical analysts use to help them analyze stock price movement, and make more educated predictions about what a stock’s next move will be in the future.
You’ve probably heard by now that stock chart patterns fall into two categories for the most part, continuations and reversals. The double bottom is a major reversal pattern that tends to form near the end of a significant downtrend that can extend for a long period of time. The inverse image of the Double Top pattern, this major reversal gets its name from the way that the pattern consists of two consecutive troughs that are usually almost equal in size, with a moderate price spike in-between them.
The double bottom can come in many variations, but the classic pattern formation usually marks a change in trending that is intermediate or long-term. It’s possible for more than one double bottom to form during an extended down trend, but until the key resistance level is broken, it’s impossible to confirm a true reversal. Investors must remember that the double bottom takes more than a few days to confirm, even though it might only take a few days to form.