STOCK GOODIES PLAYS OF THE WEEK

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P&F Chart Double Bottom Breakdown

In the P&F world, Double Bottom Breakdowns are bearish patterns that are confirmed with a support break. With bar charts, on the other hand, Double Bottoms are bullish patterns that are confirmed with a resistance break. These patterns are not contradictory. They are simply different patterns with similar names.

As noted above, the most fundamental P&F sell signal is when an O-Column breaks below the low of the prior O-Column. These two columns are separated by an X-Column. O-Columns denote falling prices, while X-Columns signify rising prices. The first falling O-Column establishes direction. The middle X-Column represents a bounce that establishes resistance. The third O-Column triggers the lower low. The inability to hold the prior low shows weakness associated with a downtrend.

As the most common signal in the P&F universe, Double Bottom Breakdowns are also the most prone to whipsaw and failure. Double Bottom Breakdown signals should be viewed in the context of the bigger picture. It is important to employ other aspects of technical analysis when using signals as common as Double Bottom Breakdowns. The chart below shows Avery Dennison (AVY) with several Double Bottom Breakdowns over the last few years.