The W-shaped pattern (double bottom) in candlestick charts

A W-bottom, also known as a double bottom, is a common reversal pattern that resembles the letter "W". It usually appears at the end of a downtrend, indicating a potential price rebound or reversal upward. It is an important signal for traders looking for buying opportunities.

Pattern Composition:

• First Bottom: The price drops to a low point and then rebounds slightly.
• Intermediate High: After the rebound, the price falls again but does not break the previous low.
• Second Bottom: The price bottoms out again, close to the first bottom.
• Neckline: A horizontal line connecting the highs between the two bottoms, serving as a key resistance level.
• Retest of the Neckline: After breaking through the neckline, there may be a retest, though sometimes it doesn't occur.

Trading Signal:

When the price breaks through the neckline, it indicates increased buying power and potential dominance by the bulls, serving as a potential buy signal. After the breakout, the neckline often turns into a support level. Therefore, it's necessary to wait for the K-line closing price to stand above the neckline to avoid false breakouts (long upper shadows appearing at the neckline). Additionally, the price at the second bottom is generally higher than the first bottom, accompanied by increased trading volume.

However, the W-bottom is not absolutely reliable, but it can help you capture trend reversal opportunities.

"This article is for K-line learning purposes only and does not constitute investment advice."