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Bullish Reversal Chart Patterns

Here are some bullish reversal chart patterns. Reversal patterns are frequently seen before a new trend begins. Knowledgeable investors and traders are always on the lookout for these patterns.

This is because you will make the most money when you enter at the very beginning of a new trend. Spotting bullish reversal chart patterns will help you to do that.

Double Bottom

double bottom 1

A double bottom looks like a 'W'. The price declines to A, then it rises a little forming a middle peak before dropping again. The buyers cannot overcome the sellers and the sellers pushed the price down.

However, the stock finds support at the price level of A. Thus, the price rises again at B. The double bottom is completed when the price rises over the middle peak.

double bottom 2

The entire pattern can be formed from days to weeks and sometimes months. The rule is, the longer it takes the double bottom to form, the more powerful the move to the upside will be.

The double bottom can be a very powerful reversal signal. New bull markets or uptrends can begin after a double bottom. Take a look at the chart above. A new uptrend developed after a double bottom. Therefore, always be on the look out for this pattern.

double bottom 3

How to trade the double bottom

There are a few ways you can trade the double bottom. You can enter either at 1, 2 or 3. Entering at 1 is more agressive while entering at 2 or 3 is less agressive.

  • There are some people who like to enter at 1. This is a slightly more agressive entry. However, if you are successful, the rewards can be great. To ensure success, traders will usually look for other confirmations. These confirmations can be the appearance of a hammer, a divergence in the oscillators and bullish sentiment.

  • There are some people who enter at 2. Notice the blue line? When the stock crosses the downtrend line, we say that the stock has broken the downtrend line. However, I personally prefer to enter at 1 or 3.

  • Entering at 3 is the safest. A double bottom has formed. The middle peak in the double bottom acts as a support. The peak after 2 has also absorbed the remaining sellers. Thus, this can be a good entry point especially if there are other confirming signals.

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