Double bottom

Double bottom

Is a term in Technical Analysis that describes a charting pattern where the price of a stock drops, then rebounds, then drops to the same (or similar) level as the original drop before yet another rebound.

Double bottoms often accrue at turning points, they may be caused by floor traders executing stops. The first bottom of a W happens when buying stops the decline from selling. Many traders who buy near that bottom, put in an order to sell out, under the recent lowest low only if prices go lower. Before the floor traders take the prices to higher levels, they want to go down and clean out those stop-loss orders. They are orders to sell just below the recent lowest price. This is where traders want to buy. These stopped out traders will add more buying power when they buy back in, what they just sold out. This buying added to the floor traders buying will help thrust prices upwards.

Double (adj.) 13c, "double, two-fold; two-faced, deceitful [1]

Bottom Ground, soil, foundation, lowest part, piece of land, farm, to reach the bottom of" is from 1808. Bottom dollar "the last dollar one has" is from 1882. [2]


Sumflow 20:34, April 1, 2011 (PDT)

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