TRADING BB

[TREND1]

W-Bottoms were part of Arthur Merrill's work that identified 16 patterns with a basic W shape. Bollinger uses these various W patterns with Bollinger Bands to identify W-Bottoms. A “W-Bottom” forms in a downtrend and involves two reaction lows. In particular, Bollinger looks for W-Bottoms where the second low is lower than the first, but holds above the lower band. There are four steps to confirm a W-Bottom with Bollinger Bands.

First, a reaction low forms. This low is usually, but not always, below the lower band
Second, there is a bounce towards the middle band.
Third, there is a new price low in the security. This low holds above the lower band.
The ability to hold above the lower band on the test shows less weakness on the last decline.
Fourth, the pattern is confirmed with a strong move off the second low and a resistance break.