Double dip stock trading

A double bottom is a charting pattern used in technical analysis. It describes the drop of a stock or index, a rebound, another drop to the same or similar level as the original drop, and finally another rebound.

The double bottom looks like the letter "W". The twice-touched low is considered a support level.

As with all chart patterns, a double bottom pattern is best suited for analyzing the intermediate- to longer-term view of a market. Generally speaking, the longer the duration between the two lows in the pattern, the greater the probability that the chart pattern will be successful. At least a three-month duration is considered appropriate for the lows of the double bottom pattern, in order for the pattern to yield a greater probability of success.

It is therefore better to use daily or weekly data price charts when analyzing markets for this particular pattern. Although the pattern may appear on intraday price charts, it is very difficult to ascertain the validity of the double bottom pattern when intraday data price charts are used.

See A "W" In The Chart? Look For A Double-Bottom Base | Stock News & Stock Market Analysis - IBD

The double bottom pattern always follows a major or minor down trend in a particular security, and signals the reversal and the beginning of a potential uptrend. Consequently, the pattern should be validated by market fundamentals for the security itself, as well as the sector that the security belongs to, and the market in general.

The fundamentals should reflect the characteristics of an upcoming reversal in market conditions.

Also, volume should be closely monitored during the formation of the pattern. A spike in volume typically occurs during the two upward price movements in the pattern. These spikes in volume are a strong indication of upward price pressure and serve as further confirmation of a successful double bottom pattern. Once the closing price is in the second rebound and is approaching the high of the first rebound of the pattern, and a noticeable expansion in volume is present coupled with fundamentals that indicate market conditions that are conducive to a reversal, a long position should be taken at the price level of the high of the first rebound, with a stop loss at the second low in the pattern.

A profit target should be taken at two times the stop loss amount above the entry price.

Double Dipping

Dictionary Term Of The Day. A measure of what it costs an investment company to operate a mutual fund. Latest Videos PeerStreet Offers New Way to Bet on Housing New to Buying Bitcoin? This Mistake Could Cost You Guides Stock Basics Economics Basics Options Basics Exam Prep Series 7 Exam CFA Level 1 Series 65 Exam.

Double top and double bottom - Wikipedia

Sophisticated content for financial advisors around investment strategies, industry trends, and advisor education. What is a 'Double Bottom' A double bottom is a charting pattern used in technical analysis.

Time Frame for a Double Bottom Chart Pattern As with all chart patterns, a double bottom pattern is best suited for analyzing the intermediate- to longer-term view of a market.

Confirming a Double Bottom Chart Pattern The double bottom pattern always follows a major or minor down trend in a particular security, and signals the reversal and the beginning of a potential uptrend. Trading a Double Bottom Chart Pattern Once the closing price is in the second rebound and is approaching the high of the first rebound of the pattern, and a noticeable expansion in volume is present coupled with fundamentals that indicate market conditions that are conducive to a reversal, a long position should be taken at the price level of the high of the first rebound, with a stop loss at the second low in the pattern.

Double Top And Bottom Pattern Diamond Top Formation Rising Bottom Stalled Pattern In Neck Pattern Hook Reversal Bottom Mat Hold Pattern.

Content Library Articles Terms Videos Guides Slideshows FAQs Calculators Chart Advisor Stock Analysis Stock Simulator FXtrader Exam Prep Quizzer Net Worth Calculator. Work With Investopedia About Us Advertise With Us Write For Us Contact Us Careers. Get Free Newsletters Newsletters. All Rights Reserved Terms Of Use Privacy Policy.