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Double Down or Double Trouble?

Today, we’re going to continue our ongoing chart pattern series with a pattern we’d all like to see take place in the broad market…

Yes, I’m talking about a bottoming pattern that could tell us when the market will finally turn back to the upside.

Of course, there are no guarantees in technical analysis or trading in general…

But with the right information, you can make a much more educated decision about which way the market might move next.

History as a Guide

Today, we’re going to cover the “Double Bottom” pattern, which is a trend reversal pattern.

But before we get to the current market, let’s look back a few years on the SPDR S&P 500 ETF Trust (SPY) for a great set of examples…

2015-2016 Daily Chart of SPDR S&P 500 ETF Trust (SPY)— Source: TradingView

In the daily chart of SPY above, you can see the wild price action from back in 2015-2016.

The market saw two large drops during this time period, and each one resolved higher following a double bottom reversal.

As I mentioned above, the double bottom is considered a reversal pattern because it reverses the prior trend.

In the examples above, you can see that the market fell sharply to the first low point, bounced higher and then rolled over right back to the same level to form a second low point.

Then, once the second low was formed and price held at the support level created by the first low, it started to move higher again.

This price action is what gives the double bottom pattern its signature “W” shape…

2015-2016 Daily Chart of SPDR S&P 500 ETF Trust (SPY)— Source: TradingView

Now, let’s fast-forward to today’s chart of the SPY…

Personally, it looks to me like the market is going to break the June lows and make another push to the downside.

However, as you can see in the daily chart below, the SPY is sitting right on the potential support level from June.

2015-2016 Daily Chart of SPDR S&P 500 ETF Trust (SPY)— Source: TradingView

If this level holds and the market makes a second push higher, we could see another double bottom take place in SPY this year.

Of course, there is no confirmation at the moment, and there are no guarantees that this will lead to a longer-term rally in the market.

It could push higher for a few days and then collapse, or support could fail immediately.

However, I wanted to show you the similarities between 2015-2016 and the current chart to hopefully offer you a different perspective on the market.

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Editor, Stock Surge Daily

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