The simplicity of profiting in the stock market is amazing. Investors that educate themselves, profit. No investor or stock trader every knows everything. I have traded for 25+ years and I am still learning every day. The amazing thing about it is, the more your learn, the more you profit. Even at this stage of my trading and investing career, I am learning more and increasing my profits.
In this lesson, we will look at the technical chart double bottom. Double bottoms are classic, easy to spot pattern formations that are bullish. Below I will lay out the keys to understanding and spotting a stock chart double bottom that has a high reward, low risk rate.
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- The first low MUST be a 52 week low or all-time low. This is important as they are the strongest pivots.
- The stock then must bounce significantly (5% minimum) and not retrace to the low for at least a two week stretch. This creates the basis for a double bottom to occur.
- The stock/commodity/market/currency must then come down at hit the previous low or make a slightly lower lower.
This creates the double bottom and buying opportunity. Investors should buy the exact low or even a slight cross below. For strict investors and stock traders, the stop would be at confirmation (taught in a different lesson) below the double bottom, or maintain a 5% stop loss on the trade. Investors and traders can use this technique to buy stocks with explosive upside potential. Note the chart below.