After the successful trade on May 25, today we have new potential at CADJPY.
The price forms a double bottom with a potential of 80.41
If you are not familiar with this formation:
A double bottom pattern is a technical analysis charting pattern that describes a change in trend and a momentum reversal from prior leading price action.
It describes the drop of a stock or index, a rebound, another drop to the same or similar level as the original drop, and finally another rebound.
What Does a Double Bottom Tell You?
The double bottom pattern always follows a major or minor down trend in a particular security, and signals the reversal and the beginning of a potential uptrend.
Consequently, the pattern should be validated by market fundamentals for the security itself, as well as the sector that the security belongs to, and the market in general.
The fundamentals should reflect the characteristics of an upcoming reversal in market conditions. Also, volume should be closely monitored during the formation of the pattern.
A spike in volume typically occurs during the two upward price movements in the pattern. These spikes in volume are a strong indication of upward price pressure and serve as further confirmation of a successful double bottom pattern.
Common mistakes 1.Do not looking for the pattern within an up trend! 2.When the bottoms are equal or second is lower than the first one - this is not a double bottom. 3.Don't be greedy and do not rush, always wait for confirmation.