Profiting From a Double Bottom

Profiting From a Double Bottom
By Charles Delvalle

Some of the best investments you can make are in stocks that have been hammered. The trick is to buy the stock after it has bottomed out and begins a long ascent to higher prices.

But how do you know when the stock has hit THE bottom? A double bottom chart pattern will often show you the way.

A double bottom chart pattern consists of four primary characteristics:

1. A bottom which forms a support line.
2. A rise which peters out, forming a resistance line.
3. A second bottom which finds support at the same place the first bottom did.
4. A rise which breaks previous resistance and confirms the double bottom pattern.

What this pattern usually tells you is that the lowest price for the stock has been reached. Once that happens, buyers flood the market and take the stock above its previous high.

When you see the stock break the former resistance, it is usually a great entry point before the stock continues higher.

If you bought Intel near the confirmation point in the chart above, your total investment would be up over 17%.