Trading Double Bottoms and Double Tops

The trading term double bottom refers to a charting pattern that is used in technical analysis. This type of pattern describes the drop of a stock or index, a rebound, another drop to the same level as the original drop, and then another rebound. This charting pattern looks like the letter "W." Where the pattern reaches the lows is considered to be a support level.

Now take the reverse of the double bottom charting pattern, the rise of a stock, a drop, another rise to the same level as the original rise, and then another drop, and you have a double top. The double top looks like the letter M. Where the pattern reaches the highs is considered a resistance level here.