Double Bottom

Double bottom

A term used in technical analysis to refer to the drop of a stock's price, a rebound, and then a drop back to the same level as the original drop. The pattern looks like the letter W. In technical analysis, this pattern is considered a positive for the stock. The stock has bottomed out and the technical analysts would expect the stock to appreciate afterwards.

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Double Bottom

In technical analysis, a situation in which the price of a security hits a low, rises 10-20%, and then hits roughly the same low before rising again. A double bottom in a relatively short period of time indicates that the low is a price support for the security. A situation where trading volume rises as the security increases from the second bottom is thought to be a bullish indicator. See also: W-shaped recovery.

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double bottom In technical analysis, a chart formation indicating stock price recoverability over time. It is characterized by a drop in a stock's price to a low level, a recovery in price, and a second decline to the previous low price. If the stock price recovers a second time, the low price reached at the two bottoms becomes a level of support for the stock. It is a bearish sign if the stock subsequently falls through this level. Compare double top.

double bottom

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Double bottom. Double bottom is a term that technical analysts use to describe a stock price pattern that, when depicted on a chart, shows two drops to the same dollar amount separated by a rebound.

For example, if a stock that had been trading at about $28 a share dropped to $18, rebounded to trade at about $22 for several weeks, and then dropped to $18 again, analysts would identify $18 as a double bottom.

An analyst observing this pattern might conclude that investors were comfortable paying $18 for the stock, and that the price might not drop below that level in the near term. In technical terms, the analyst would say that there was support for the price. However, there's no guarantee that it might not drop further and hit a new low.