How can a Double Bottom help you profit?
After the 2nd bottom hit the stock bounced up. You could enter the trade on the bounce or be cautious and wait for the break-out of resistance before buying. In this case ressistance would be $2.75. If you were cautious you wouldn't get in at the exact bottom and this could lead to more winning trades. Why does this pattern work? During the 2nd bottom the stock fails to make a lower low. This shows that the given downtrend is actually weakening and that the bears may not be in charge for much longer. After the stock comes back up and breaks resistance it shows that the stock is on its way to making a higher high. That is a characteristic of an uptrend and not a downtrend and so it shows that the bulls are taking control. This is one of the most common patterns out there and many traders will find this pattern at the end of major bear markets. Other Chart Patterns Chart patterns are naturally occurring in the stock market and indicate where a given security is likely to head in the near future. Learning the different patterns out there can give you some insight to market directions. Here are a few patterns to consider. Bearish Rectangle Pattern - This is a bearish pattern that normally occurs during downtrends Bullish Symmetrical Triangle - This is a bullish signal which can take a while to form Bear Flag - This is a short term bearish indicator
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