What is the psychology behind double bottom pattern in Indian Stock Market
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What Is the Double Bottom Pattern?
In the double bottom pattern, to enter the long, the price range from neckline to the price objective is the ideal bandwidth to purchase the stocks. Know in detail about the double bottom pattern, neckline, price objective, in the upcoming lines.
The stock charts create various graph patterns of the stock/forex/cryptocurrencies prices and each pattern symbolises the trend like bearish, bullish, or sideways.
In the case of the double bottom pattern, the graph represents the trend reversal, from bearish to bullish, which means, the stock price begins to move upwards, from low to high.
While you encounter the double bottom pattern, you can go for long positions that means to opt for buy options.
You can do it as the price touches the neckline or wait for the retracement ( a minor pull-back) and then consider long positions.
Whenever you find a breakout having significant stock volumes, it is a sign of a good trading signal and hence check for high trading volumes of the stocks.
Schematic Diagram: Double Bottom Pattern
Illustration of Double Bottom Pattern:
Every trading stock in the stock market shows a specific price pattern on the graph plane. Candlestick patterns are the most popular charts utilised for technical analysis.
The rough sketch drawn above characterises the price variations of stock over a period.
The graph takes a downward curve, rises to the highest point between the two troughs, and refers to the neckline.
Neckline is the price where you can observe the first correction. And, the graph falls back to the level of the previous low.
Then, further rises above the neckline level and after a short rise it pulls back to the neckline.
From there it rises to the price objective. The level of the price objective is the upward price movement, equal to the distance between the neckline and the first bottom.
Graphical Representation of Stock Price:
The stock takes a downtrend and reaches a low of INR 50, then rises to INR 60, and again falls back to 50.
The two lows of 50 are considered as first/second bottom, also referred to as the double bottom pattern.
As the graph rises above the second bottom, it is an indicator to say that the share price is accelerating to the upward movement.
Experts say that it is the reversal of the downward movement, also called the bearish reversal.