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double bottom Archives

What is a Double Bottom?

In technical analysis of stocks, a double bottom chart pattern could signal a prime buying opportunity–if you’re careful.

The technical analysis of stocks can yield lots of helpful information. Basic technical analysis includes those factors we look at regularly, such as moving averages, trading volume, and momentum. However, when you really dig in, you can start analyzing things like double top or double bottom patterns, earnings gaps, and much more. 

A double bottom describes the fall in the price of a stock or index, followed by a rebound, then another drop to a level that’s roughly similar to the initial drop, and finally, another rebound. Consequently, the double bottom chart pattern resembles the letter “W.”

You can find double bottom patterns within charts that are intra-day, daily, weekly, monthly, yearly, and longer-term. The two lows should be distinct. According to technical analysts or “chartists,” the second bottom can be rounded while the first should be precise and sharp. The pattern is complete when prices rise above the highest high in the formation. The highest high is termed the confirmation point.

What does this movement mean for investors? The second low suggests that there’s enough support for the stock that it’s unlikely to sink any lower. It’s already “bottomed” twice, and is poised to move upward.

This comes with a very large caveat, though. It’s easy to get anxious and jump in or out of a stock too soon (or too late). Managing risk at this point is crucial. It’s amazingly easy to misread the chart and lose a lot of money quickly. 

That said, investors who don’t mind some risk and feel comfortable managing that risk could take some quick profits. 

To learn more, download our FREE report, Technical Analysis of Stocks: How Relative Performance Works, Why Trading Volume is Important, and Other Chart-Reading Lessons. 

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Cabot Stock of the Week 337

From the Cabot Stock of the Week 337 issue of Cabot Stock of the Week|by Timothy Lutts|Stock Market

While some segments of the broad market have experienced a sharp correction over the past month (growth stocks in particular), the broad market has not fallen apart; in fact, many indexes hit new highs just last week. And, of course, today’s big jump rather...
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Cabot Prime Week Ending February 26, 2021

From the Cabot Prime Week Ending February 26, 2021 issue of Cabot Prime|by Cabot Wealth Network|Cabot Prime

Stock Recommendation Tracker The Stock Recommendation Tracker is a table that features all of the current recommendations in all of our portfolios. It’s a quick way for you to see what stocks are currently in our portfolios and will highlight new additions or any to...
Read More

Cabot Prime Pro Week Ending February 26, 2021

From the Cabot Prime Pro Week Ending February 26, 2021 issue of Cabot Prime Pro|by Cabot Wealth Network|Cabot Prime Pro

Stock Recommendation Tracker The Stock Recommendation Tracker is a table that features all of the current recommendations in all of our portfolios. It’s a quick way for you to see what stocks are currently in our portfolios and will highlight new additions or any to...
Read More

Cabot Growth Investor 1466

From the Cabot Growth Investor 1466 issue of Cabot Growth Investor|by Mike Cintolo|Growth Stocks

More Cracks Appear At the start of November we saw a couple of blastoff-type indicators flash green (like the Three Day Thrust rule), and that turned out to be the start of a powerful intermediate-term advance. During the next two-plus months, progress was relative there...
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Cabot Small-Cap Confidential Weekly Update

February 25, 2021|From Cabot Small-Cap Confidential|by Tyler Laundon|Small Cap Stocks

The big picture for the market is that the uptrend is intact but under the surface we’re continuing to see pockets of turbulence. While the S&P 500 is just 2% off its high from last week and the S&P 600 Small Cap Index a..
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Cabot Global Stocks Explorer Bi-weekly Update

February 25, 2021|From Cabot Global Stocks Explorer|by Carl Delfeld|Emerging Markets

You may have seen that a relatively new Explorer idea, Fisker (FSR), was up 38% yesterday. It turns out that my analogy of comparing the company to Apple’s relationship to Foxconn was truer than even I could imagine. The news yesterday was that Foxconn will be a..
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Cabot Dividend Investor Weekly Update

From the issue of |by Tom Hutchinson|Dividend Stocks

Earnings have been sensational. Reported earnings for S&P 500 companies have grown an average of 2% in the fourth quarter, compared to an expected -11%.
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Cabot Undervalued Stocks Advisor Weekly Update

February 24, 2021|From Cabot Undervalued Stocks Advisor|by Bruce Kaser|Value Investing

The stock market is clearly accelerating the “reopening” trade. Small cap and cyclical stocks as well as commodity prices are surging, interest rates continue to tick up (the 10-year Treasury yield is now 1.38%, up from 0.92% at year-end), and novel financial vehicles SPACs,...
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Cabot Stock of the Week 336

From the Cabot Stock of the Week 336 issue of Cabot Stock of the Week|by Timothy Lutts|Stock Market

With this week’s recommendation, I’m swinging back to the more conservative side with a solid technology company poised for big gains from the 5G communications rollout.
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Cabot Prime Week Ending February 19, 2021

From the Cabot Prime Week Ending February 19, 2021 issue of Cabot Prime|by Cabot Wealth Network|Cabot Prime

Stock Recommendation Tracker The Stock Recommendation Tracker is a table that features all of the current recommendations in all of our portfolios. It’s a quick way for you to see what stocks are currently in our portfolios and will highlight new additions or any to...
Read More

Cabot Prime Pro Week Ending February 19, 2021

From the Cabot Prime Pro Week Ending February 19, 2021 issue of Cabot Prime Pro|by Cabot Wealth Network|Cabot Prime Pro

Stock Recommendation Tracker The Stock Recommendation Tracker is a table that features all of the current recommendations in all of our portfolios. It’s a quick way for you to see what stocks are currently in our portfolios and will highlight new additions or any to...
Read More

Cabot Growth Investor Bi-weekly Update

February 18, 2021|From Cabot Growth Investor|by Mike Cintolo|Growth Stocks

The market took another hit this morning, but like yesterday, the major indexes have found support as the day has progressed—just after 3 pm EST, the Dow was down 70 points while the Nasdaq was off 66 points. Part of the reason for recent...
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Cabot Global Stocks Explorer 729

From the Cabot Global Stocks Explorer 729 issue of Cabot Global Stocks Explorer|by Carl Delfeld|Emerging Markets

Some investors are bracing for the possibility that all this will lead to a surge in the cruelest tax of all – inflation.
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Cabot Small-Cap Confidential Weekly Update

February 18, 2021|From Cabot Small-Cap Confidential|by Tyler Laundon|Small Cap Stocks

As mentioned last week, today’s Weekly Update will be an abbreviated version owing to the short work week and because of family commitments as our kids are out of school and I am solo parenting, making free writing time hard to come by. said,...
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Cabot Dividend Investor Weekly Update

February 17, 2021|From Cabot Dividend Investor|by Tom Hutchinson|Dividend Stocks

Earnings have been sensational. Reported earnings for S&P 500 companies have grown an average of 2% in the fourth quarter, compared to an expected -11%.
Read More

Cabot Undervalued Stocks Advisor Weekly Update

February 17, 2021|From Cabot Undervalued Stocks Advisor|by Bruce Kaser|Value Investing

With the stock market regularly surging to record highs, it may seem like an unusual time to focus on valuation. After all, many stocks are remarkably expensive on traditional measures, and even somewhat lofty on non-traditional measures. But valuation still matters, especially if market...
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Cabot Stock of the Week 335

From the Cabot Stock of the Week 335 issue of Cabot Stock of the Week|by Timothy Lutts|Stock Market

This week’s recommendation is a small company with no earnings, minimal revenues and a lot of competition.
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Cabot Prime Pro Week Ending February 12, 2021

From the Cabot Prime Pro Week Ending February 12, 2021 issue of Cabot Prime Pro|by Cabot Wealth Network|Cabot Prime Pro

Stock Recommendation Tracker The Stock Recommendation Tracker is a table that features all of the current recommendations in all of our portfolios. It’s a quick way for you to see what stocks are currently in our portfolios and will highlight new additions or any to...
Read More

Cabot Prime Week Ending February 12, 2021

From the Cabot Prime Week Ending February 12, 2021 issue of Cabot Prime|by Cabot Wealth Network|Cabot Prime

Stock Recommendation Tracker The Stock Recommendation Tracker is a table that features all of the current recommendations in all of our portfolios. It’s a quick way for you to see what stocks are currently in our portfolios and will highlight new additions or any to...
Read More

Cabot Growth Investor 1465

From the Cabot Growth Investor 1465 issue of Cabot Growth Investor|by Mike Cintolo|Growth Stocks

Simply Put: Very Impressive Action Two weeks ago, the major indexes and some individual stocks began to flash abnormal action, a couple of key leaders were threatening to break down and some late-in-the-advance type of action (heavily shorted stocks going nuts) was occurring. Importantly, the...
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