Double Bottom
CADILAHC: Take advantage for Pull Back.Current Candle Long Legged DOJI.
T+2 Tgts:@ 345.45 - 347.50 - 349.55 - 351.50 - 355.50 - 359.00+
Best Entry & Accumulation Level: @ 339.20 - 335.10 - 333.10.
DOUBLE BOTTOM : REVERSAL PATTERN1. The Shape of The Double Bottom –
A double bottom occurs when prices form two distinct bottoms on a chart. A double bottom is only complete, however, when prices climb above the highest high point between the two bottoms. The double bottom is a reversal pattern of a downward trend in a stock’s price. Sometimes called a “W” formation because of the pattern it creates on the chart, the double bottoms are also one of the most frequently seen and common of the patterns along with double tops Because they seem to be so easy to identify, the double bottoms should be approached with caution by the investor.
2. Formation of The Double Bottom –
Leading to the formation, prices trend downward over the short to intermediate term (3 to 6 months) and usually do not fall below the left Bottom. There should be at least a 10% upside between the two bottom, measured from low to high. Two distinct Bottoms with a price variation between peaks of 4% or less. This is not crucial except that the two Bottoms should appear near the same price level and not be part of the same consolidation pattern.
3. Duration of The Double Bottom –
The Double Bottom has a minimum duration of 3 weeks and it rarely exceeds 3 or 4 months long. Anything less than 3 weeks of duration likely to be a pennant formation, not a Double Bottom.
4. The volume inside The Double Bottom –
Usually higher on the left bottom than the right.
5. Pre-mature or False Breakout –
Because volume is usually low at the time of breakout, it takes very little activity to bring about an erratic and false movement in price, talking the price below the neckline and bounces back again.
6. Breakout –
The confirmation point is the highest high between the two Bottoms, neckline, Prices closing above the neckline confirm a double Bottom and the breakout.
HOW TO TRADE THE DOUBLE BOTTOMS
Trading Rules.
1. Entry –
Buy the stock day after Prices closing above the highest high point between two bottoms. If you miss it, wait for the throwback then buy when price resumes the breakout direction after the throwback completes. When you missed and, If you Don’t Get a throwback around the neckline then Don’t Chase The Stock for buying.
2. Price Target –
Compute the formation height by subtracting the lowest low from the highest high in the formation. Add the difference to the highest high between the two bottoms. The result is the expected minimum price target.
3. Taking Profit –
For short-term traders, sell the stock when the price reaches near to the minimum price target computed as above. For intermediate and long-term traders, hold the stock as per your risk & capital management applied before entering into a trade.
4. Stoploss –
Usually, price closing below the second bottom is a stop-loss. But very often, The gap between the second bottom and neckline price is very high. So it will be an unfavourable risk-reward ratio. Ever felt you are getting enough trading calls right, but aren’t still making significant profits? An unfavourable risk-reward ratio could be the answer.
You may be adept at reading chart patterns but if you trade with an unfavourable risk reward ratio, you are headed for big losses on your trading portfolio.
Nifty Metal – Bottomed out ?Nifty Metal NSE:CNXMETAL has been downtrend ever since mid January and metal stocks have been hammered black and blue due to the trade war worries between US and China.
However, the pullback this week from the lows of 3060 was quite strong and I can see a bottom formation here with RSI showing divergence.
Good opportunity to buy stocks like Hindustan Zinc NSE:HINDZINC , JSW Steel NSE:JSWSTEEL with stop loss at their July lows.
Disclaimer: Views expressed here are my own, and should not be interpreted as an Investment Advice. Please consult your Financial Advisor for investments.
POSITIONAL TRADE IN YESBANKAS PER THE PREVIOUS TRADE CALL ON YESBANK HAS BROKEN
OUT OF THE DOUBLE BOTTOM FORMATION
AND HAS MANAGED TO GIVE A PERFECT PULLBACK
SIGNS ARE GOOD TO GO LONG SO WE ARE ENTERING INTO
A POSITIONAL TRADE FOR THE COMING TW0 WEEKS
FUTURES TRADE
AUGUST FUTURES
BUY@387
STOP@382.5
TARGET@397
LOT:1750
QTY:2
YESBANK DOUBLE BOTTOM FORMATION BREAKOUT ON THE VERGEYESBANK ON THE VERGE OF BREAKING OUT OF DOUBLE BOTTOM PATTERN IN AN HOURLY CHART.
LET US CALCULATE THE RANGE OF THE PATTERN AND GO
LONG AFTER A BREAK-OUT
BREAK-OUT IS EXPECTED TILL 10:30
SAME PATTERN IS VISIBLE IN 30-MIN CHART
WILL SHOW BREAK-OUT EARLY
WAIT FOR THE CONFIRMATION!!
Oriental Bank of Commerce - Double BottomAfter being hammered since almost a month (June 13), looks like some buying interest is coming back to PSU banks.
I can see that Oriental Bank of Commerce NSE:ORIENTBANK has formed a Double Bottom around 71 levels with a positive RSI divergence.
Looks like the stock is slowly moving towards the first target of 86.75 .
Good opportunity for option writers here with a stop loss of 69.
Disclaimer: Views expressed here are my own, and should not be interpreted as an Investment Advice. Please consult your Financial Advisor for investments.
Nifty Metal – Temporary Bottom in place ?After a long downtrend from 4300 levels, looks like Nifty Metal index NSE:CNXMETAL has managed to get some support at least temporarily at 3320 levels.
It will be interesting to see what happens at the trendline resistance which is currently around 3700 levels.
I can see a Double Bottom here with positive divergence and also a Morning Star formation.
Good opportunity to go long on metal stocks like Tata Steel, Hindustan Zinc which are showing a similar pattern, with a small stop loss.
Disclaimer: Views expressed here are my own, and should not be interpreted as an Investment Advice. Please consult your Financial Advisor for investments.
Tata Steel – All set to rally ?After a long downtrend from 750 levels in Jan end, looks like we have a bottom in place for Tata Steel NSE:TATASTEEL at around 537 levels.
I can see a Double Bottom here with positive RSI Divergence.
It remains to be seen what happens at the trendline resistance which at present is around 583 levels.
I expect the stock to reach at least 610 for a first target.
Good opportunity to go long with stop loss at 535.
Disclaimer: Views expressed here are my own, and should not be interpreted as an Investment Advice. Please consult your Financial Advisor for investments.
SREI Infra short term viewRefer chart. Double bottom formation going on. Consider to buy, after formation done.
Vijayaraghavan,
Kovilpatti
Oil Marketing Companies (OMCs) – Bottom in place?The Bear onslaught on Oil Marketing Companies (OMCs) has been going on for a long time now.
However, with Crude starting to come down we may see some buying interest coming back to these stocks.
Rupee is also at one of the lowest levels against Dollar, so a bounce back there may further help cut Oil Marketing Companies’ Losses.
I can see the price making a lower bottom here with rising RSI showing a positive Divergence.
Good opportunity to buy HPCL NSE:HINDPETRO with a small stop loss for a first target around 327 levels.
Similar structure can be observed for other stocks like BPCL and IOC.
Disclaimer: Views expressed here are my own, and should not be interpreted as an Investment Advice. Please consult your Financial Advisor for investments.
Coal India – Double BottomCoal India NSE:COALINDIA has reversed sharply from strong support zone between 260 – 265 levels.
To me it looks like a double bottom formation with positive divergence.
Good opportunity to go long with stop loss a few points below the double bottom lows and first target near 290 levels.
Disclaimer: Views expressed here are my own, and should not be interpreted as an Investment Advice. Please consult your Financial Advisor for investments.