Double Bottom

A bullish reversal pattern where price makes two nearly equal lows separated by a recovery peak — resembling the letter W — signaling a potential end to the downtrend.

The double bottom is the bullish counterpart to the double top. Price declines to a low, bounces to a resistance level (the neckline), falls back to approximately the same low, then recovers and breaks above the neckline — completing the pattern and triggering the buy signal. The second test of the low represents buyers successfully defending that support level a second time, suggesting genuine demand at those prices.

The pattern is most reliable when the two lows are at approximately the same level (a second low slightly higher than the first is even more bullish, as it shows buyers stepping in earlier), and when the neckline breakout is accompanied by expanded volume. The price target is the height of the pattern (from the lows to the neckline) added to the breakout point.

Double bottoms are among the more reliable reversal patterns, particularly when they form after extended downtrends. They represent an accumulation phase where patient buyers absorb the remaining supply. The double bottom concept also applies at the macro level — major market indexes sometimes form W-shaped bottoms during recoveries from bear markets, with the second test of the lows being the final capitulation before a sustained recovery.

This definition is for informational and educational purposes only. Nothing on Finance Compass constitutes financial, investment, or trading advice. Always conduct your own research and consult a qualified professional before making financial decisions.