Double bottom

Hi John, thanks for the question. 

Both double bottom and double top patterns are reversal chart formations. They signal that the dominant market side has started to lose momentum, which is opening the door for a reversal and change of the trend direction. 

Double bottom is a bullish reversal pattern that occurs near the end of a downtrend. On the other hand, the double top takes place at the highs when there are two equal peaks. 

In this case, the buyers have failed to extend the series of the higher highs by creating the double top pattern as the second high is not registered as a higher high, but rather as an equal high. This suggests that the momentum is waning, indicating a potential change in the trend direction.

For instance, in the chart above, we see that Tezos is creating a potential double top pattern. You see that the second peak is not registered as a higher high, but rather as an equally high and that the buyers failed to close above the horizontal resistance, although the price action briefly moved higher. As a result, the sellers are able to capitalize on this weakness to push the price action lower and erase previous gains. 
In this case, the double top pattern is still in the making. A break below the $2.25 mark, which is a neckline, would open the door for the activation of the pattern. We would consider the pattern as completed if the price would reach the area just below the $1.50 mark.






















 

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