We often take a double bottom to be a sign of a bullish market structure.
A double bottom with a breakout ends up looking like a 'W'.
However, it's NOT double bottom when the second low is LOWER than the first low.
The second leg must be EQUAL or SLIGHTLY GREATER than the first low, for it to be considered a valid 'W'.
Why? Well, the second leg of the double bottom is just a test of the first initial lows.
If we break those old lows, we haven't really established a bottom.
I can see how taking this trade may have been tempting; it's pretty damn close to a 'W'.
But not quite, and it's evident what happened shortly afterwards.
A double bottom with a breakout ends up looking like a 'W'.
However, it's NOT double bottom when the second low is LOWER than the first low.
The second leg must be EQUAL or SLIGHTLY GREATER than the first low, for it to be considered a valid 'W'.
Why? Well, the second leg of the double bottom is just a test of the first initial lows.
If we break those old lows, we haven't really established a bottom.
I can see how taking this trade may have been tempting; it's pretty damn close to a 'W'.
But not quite, and it's evident what happened shortly afterwards.