Double bottom is a rebound formation that is formed in a downtrend. A double bottom formation is made up of two bottoms where the volume is greatest in the second bottom.
For a double bottom to be valid some time must have elapsed between the first and the second bottom, two weeks is a common requirement. A horizontal trend line is drawn from the top levels of a double bottom formation. The price target for a double bottom is the distance between the horizontal trend line and the bottom level of the second bottom measured upward from the horizontal trendline. A buy signal for a double bottom is given when the horizontal trend line is crossed with increasing volume.
