Double Bottom: Trading the 'W' Reversal

The shape

A decline makes a low, bounces meaningfully, returns to (almost) the same low, holds — then breaks above the bounce high (the neckline). Drawn out, it's a "W".

Why it works

Sellers had two full opportunities to break the level and couldn't. The second failed test proves real demand lives there. When price then clears the neckline, short-sellers cover and sidelined buyers commit — fuel for the reversal.

Our scanner's rules

• Two swing lows within ~3% of each other, at least two weeks apart (twin lows two days apart prove nothing).
• The second low must be recent, and the signal fires only on the neckline breakout — never before.
• Entry: the neckline break. Stop: below the lower of the two lows. Target: the pattern's height (neckline minus lows) projected upward.

Common mistakes

• Buying at the second low *hoping* it holds — that's catching a knife with extra steps. The pattern only exists after the neckline breaks.
• Confusing a pause in a downtrend with a base: check the volume — genuine double bottoms usually show heavier volume on the breakout than on the decline into low #2.
• Placing the stop at the neckline instead of the lows: normal retests will shake you out of a valid pattern.

Live matches: the Double Bottom card on the Strategies page.