Double bottom is a bullish reversal chart pattern that forms after a sustained downtrend, characterized by two successive price lows at approximately the same level separated by a moderate rally — visually resembling the letter W. The pattern signals exhaustion of selling pressure and a probable trend reversal to the upside, but only once price closes decisively above the neckline connecting the two troughs.
Key Takeaways
- The pattern is not confirmed until price closes above the neckline on a daily bar — intraday breaks above the neckline that reverse count as false breakouts.
- Both troughs must be within 3–5% of each other in price; a meaningfully lower second bottom is a lower-low continuation, not a double bottom.
- The measured move target is calculated before entry: neckline price plus the neckline-to-bottom distance gives a quantifiable profit objective.
How Double Bottom Works
A double bottom forms in three stages. First, price declines to a new low — the first trough — then stages a partial recovery to the neckline level. Second, price declines again to approximately the same low, forming the second trough. Third, price rallies back through the neckline with conviction.
The neckline is the horizontal level defined by the peak between the two bottoms. This peak is the key reference price for the entire trade — entry, target, and pattern validity all depend on it.
Volume behavior distinguishes high-quality setups from weak ones. The ideal signature is lower volume on the second trough compared to the first (less panic selling, fewer forced liquidations), followed by a volume expansion as price clears the neckline. When the second bottom forms on below-average volume without a capitulation spike, failure rates rise because the selling pressure may not be genuinely exhausted.
Measured move target:
Target = Neckline Price + (Neckline Price − Bottom Price)
This formula gives a price-level objective derived from the pattern’s own geometry rather than an arbitrary multiple.
Practical Example
AAPL sells off from $195 to a first bottom at $152, then rallies to a neckline at $168 before declining again. The second bottom forms at $150 — just 1.3% below the first, well within the 3–5% tolerance. Volume during the second trough is 30% below its 20-day average, reflecting reduced selling conviction.
Price then rallies and closes above $168 on above-average volume. A swing trader enters at $169 on the confirmed breakout close.
- Stop-loss: $147 (just below the second bottom, with $3 of cushion)
- Target: $168 + ($168 − $150) = $186
- Risk per share: $22 | Reward per share: $17
- Risk/reward: 0.77:1 — tighter than the standard 1:2 minimum, but acceptable given Bulkowski’s 64% post-confirmation success rate
- Position sizing: $50,000 account risking 1% ($500) ÷ $22 risk = 22 shares
A double bottom is a bullish reversal pattern shaped like the letter W. Price falls to a low, recovers partially, then tests the same low again before rallying. The pattern confirms when price closes above the peak between the two lows.
Common Mistakes
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Entering before neckline confirmation. Traders anticipate the breakout and buy during the second trough. If the pattern fails and price makes a new low, the stop gets hit before the trade even had a chance. Wait for the daily close above the neckline.
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Ignoring volume on the second trough. A second bottom formed on heavy, spike-like volume can indicate a final capitulation washout — which is actually a stronger signal than a quiet drift to the low. What raises the failure rate is a low-volume second bottom with no climactic selling at all, suggesting buyers haven’t absorbed the remaining supply.
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Misidentifying a lower-low as a double bottom. If the second trough is 8–10% below the first, the pattern is not a double bottom — it’s a continuation of the downtrend. Using a strict 3–5% price tolerance between troughs filters most of these false identifications. Comparing the example: a first bottom at $152 and a second at $140 ($12 lower, or about 8%) would disqualify the setup.
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Chasing false breakouts. Price often spikes above the neckline intraday on news or a market open gap, then closes back below it. Requiring a full daily close above the neckline — not just a tick or a 5-minute candle — eliminates most of these traps. This single filter disproportionately improves win rate relative to the small delay in entry.
How JournalPlus Tracks Double Bottom
JournalPlus lets traders tag entries with a setup type — including double bottom and related patterns like double top — so they can filter their trade history by pattern and measure their own confirmation rate over time. The analytics dashboard shows average gain, average loss, and win rate per setup tag, giving traders real data on whether their double bottom trades are actually performing at or above Bulkowski’s 64% benchmark.
