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Read full review to know how a double bottom chart pattern is formed. In the pattern, two swing bottoms are placed side by side and placed almost at the same level. The reversal pattern is reliable and it gives high probability trade. The pattern is formed in a down trending market when the price hits the support level twice and the price then continues moving inan uptrend.
These are pressure areas in the stock chart and here those traders who are holding short position book profits. This is where long traders enter the market. When a double bottom formation is formed then the trend changes from downtrend to uptrend and here the support trend line is almost placed horizontally and it connects the two swing bottoms.
The pattern looks like a W where one swing top and two swing bottoms are formed. This is how it gets its name.
Double top is formed when there is increase in demand and buyers are strongerthan the sellers. When the stock is in a downtrend then the stock makes lower lows and lower highs. As the support level is reached then the buying is increased. As the demand increases, the price rises and it forms a swing low. This forms the swing bottom or a double top formation.
Here the demand is more than the supply andthe price tends to rise. When the buying gets exhausted selling continues because the price to sell is better. This creates an increase in supply and the price startsto fall. This creates the swing bottom of the pattern formation.
Many traders are selling at this level andtheprice is falling but this is not where the fund houses are selling. Instead they are the buyers in this market. This time the price does not fall down a lot and does not go below the swing low. All it does is it reaches the previous swing low and this forms a major support level.
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