In a downtrend, every rebound after hitting a new low is generally considered to be a single-bottom rebound. If a new low does not reach a new low after a second test, it is considered to be a double-bottom rebound. As shown in Figure 1:
figure 1)
Compared with trough A, trough B is a rebound with a single-bottom structure, and B1 is a rebound with a double-bottom structure relative to A1.
The rebound of the single bottom structure may also evolve into a V-shaped reversal, but it is not easy to grasp.
The rebound of the double-bottom structure may also evolve into a reversal, and the reversal of the double-bottom structure will be more stable and easier to grasp than the reversal of the single-bottom structure.
Also, the trading signals in the double bottom structure will be more reliable than the trading signals in the single bottom structure, which is why I prefer to choose the structure entry signal that has been tested twice.
Let's look at a case, as shown in Figure (2):
figure 2)
In such a downtrend, suppose our trading plan is to buy the bottom and go long. Then points a, b, c, and e are all rebounds of a single-bottom structure, not a stable bottom-hunting and long-term structure.
Compared with the previous low point c, point d is a rebound of the double-bottom structure of the second test. A bullish trading signal appears at point d. Here, you can try to buy the bottom and go long, and place the stop loss below the lowest price of the double-bottom structure. However, after the Zhongyang line, there is a reverse K-line with a certain long upper shadow line, which shows that the bearish kinetic energy is still stubbornly suppressing the bullish power.
Point f tested point e and did not hit a new low, which is in line with the double-bottom structure characteristics of the second test without a new low. On the right bottom f, there is a hammer line signal and the harami line breaks the long signal, then point f is a relatively stable double-bottom structure rebound entry point, and the market outlook barely walks out of a small rebound band market.
No matter whether it is to go long against the trend, or to go long with a callback, the reversal of the double bottom structure will be more stable than the reversal of the single bottom structure, and the trading signals in the double bottom structure will be more reliable than the trading signals in the single bottom structure Some, do you understand?
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