Definition Of A Double-Bottom Failure:
A double-bottom typically fails to become (with hindsight) a downtrend preparing to become an uptrend when the following happens:
1) The technical indicators (RSI, MACD, Momentum, Money Flow, Williams % R, ROC, OBV, Ult Oscillator etc.,) turn downwards long enough to cross back below their 50% or 0% thresholds. NB: Google these "mysterious terms" if you want to know what they mean.
2) A breakout above the horizontal "top" line (also known as the "confirmation point") fails to hold and the price action slips below it once more.
3) A BUY FLAG or PENNANT formation 'breaks down' prior to the anticipated upward thrust through the confirmation point.
4) "Bad news" i.e. negative fundamentals come into play and bring about a collapse in the share price at ANY point AFTER the formation of the double-bottom but prior to any sustained breakout.
IMPORTANT NOTE:
Generally, volume in a double bottom is usually higher on the left bottom than the right. Volume tends to be downward as the pattern forms. Volume does, however, pick up as the pattern hits its lows. Volume increases again when the pattern completes, breaking through the confirmation point.
Monitoring volume is a key aspect of determining whether or not a double bottom is valid.
Our "double-bottom" fits this 'volume scenario' quite nicely.
TradingGreen: In my first post back to this forum two days ago I made a real point of suggesting that folk who DON'T understand the very environment that they're trading in, " SPEND TEN MINUTES A DAY LEARNING UP ON IT".
Your (very valid) question along with 'countless other questions and answers' about the technical aspects of trading can all be found by going to Google and spending a few minutes searching.
All the best
AI
