What is a Double Bottom Pattern? Definition, Formula, and Example
A double bottom is a W-shaped bullish reversal pattern where price tests a support level twice with a rally between the two lows, confirmed by a breakout above the intervening peak with an upward break-out rate of 64%.
A double bottom is a bullish reversal pattern shaped like the letter W, formed when price tests a support level twice with a moderate rally between the two lows. The pattern signals that sellers failed to push price below support on the second attempt — buying pressure absorbed the test and exhausted the downtrend. Thomas Bulkowski's pattern encyclopedia places the double bottom's upward break-out rate at 64% with an average post-breakout gain of 38%, making it one of the more reliable reversal formations in the technical playbook.
How to Identify a Double Bottom
The pattern requires six elements:
1. Preceding downtrend of at least 10% to establish the reversal context.
2. First low (Bottom 1) establishes the support level.
3. Interim rally to a peak (the "neckline") typically 10-20% above Bottom 1.
4. Second low (Bottom 2) prints within ~3-4% of Bottom 1's price. A slightly higher Bottom 2 is more reliable than perfectly equal lows.
5. Time between bottoms: 2 weeks to several months. Tightly clustered bottoms (under a week apart) are noise, not structure.
6. Confirmation: a daily close above the neckline on volume at least 20% above the 20-day average.
Measured-move target: the height from the bottoms to the neckline, added to the breakout price.
Worked Example: AMD 2022-2023
Advanced Micro Devices AMD printed a textbook double bottom in late 2022. Bottom 1 came in at $54.57 on October 13, 2022. The relief rally pushed AMD to a neckline peak of $77 on November 14. Bottom 2 followed at $63.40 on December 28 — a higher low, which strengthens the pattern.
AMD broke the neckline at $77 in early January 2023 on heavy volume. The measured-move target — neckline minus bottom = $22, added to $77 — implied $99. AMD hit $97 by mid-February and extended to $132 by mid-July, exceeding the target by 33%. Traders who entered on the neckline breakout with stops below $63.40 had a risk-reward of roughly 2:1 to the measured move and over 4:1 to the eventual peak.
When Traders Use Double Bottoms
Three primary use cases:
- Trend reversal long entries when an established downtrend prints the W structure and breaks the neckline.
- Support confirmation in sideways markets where the pattern reinforces a key floor and validates accumulation.
- Multi-timeframe alignment — a weekly double bottom backed by a daily break of structure is a high-conviction setup used by swing and position traders.
Stop placement typically sits a few percent below Bottom 2. Position sizing uses the neckline-to-stop distance as the risk unit.
Limitations and Misconceptions
The 36% failure rate is non-trivial — false breakouts above the neckline often retest the line as resistance and reverse. Pattern reliability degrades sharply when the two bottoms are too close in time (under two weeks), volume contracts on the breakout instead of expanding, or the preceding downtrend was shallow (less than 10%). Perfect price symmetry between Bottom 1 and Bottom 2 is overrated; Bulkowski's data shows higher-Bottom-2 variants outperform perfectly equal bottoms. The pattern also gets confused with rectangle consolidations — the W shape requires a distinct interim peak, not a sideways base.