List of Financial Market Terms

In stock trading, options trading, and futures trading, "double bottom" describes a stock dropping, rebounding, dropping similarly to the first drop, and another rebound. 

A Double Bottom is a bullish pattern.  It is used by Trader's as a reversal pattern, indicating a reversal of a downtrend.  The difference in the troughs (A) and the peaks (B) is generally the minimum the stock will rise from the B line (also known as double bottom resistance).

See the picture below to view the "W" shape a double bottom makes when viewing from a live trade room or day trade system.

double bottom pattern in a stock

As noted, the height is established by the difference between double bottom support and resistance.  In this case, double bottom support resides at approximately 15 while double top resistance resides at approximately 23.  The difference between the two is 8 (noted by the large yelow oval. 

Add 8 to the double top resistance breakout level of 23, and you get an anticipated measured move of 31. As you can see, the stock did in fact reach 31, noted by the smaller yellow oval.

It is not uncommon for the stock to retrace to double top resistance turned support after breaking out.  In this visual example, the stock did just that.  Per my experience, it appears a retracement takes place approximately 70% of the time.

See also: Double top pattern, triple top pattern, triple bottom pattern, ascending triangle pattern.

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