March 20, 2018

Identifying Trend Reversals in Oil Using Double-Bottom Chart Patterns

Trading opportunity at important support and resistance level

Trading the double bottom chart pattern is very profitable for the long term oil traders. The double bottom chart pattern is strong bullish reversal signal. Professional oil traders use two kinds of entry while trading this chart pattern. The aggressive traders open their long position in the second bounce at the support zone with price action confirmation signal. On the contrary, the conservative trader goes for long with the valid break of the neckline.

Let’s see an example of double bottom chart pattern in the oil chart:

Figure: Trading the double bottom char pattern in the daily oil chart

Figure: Trading the double bottom chart pattern in the daily oil chart

Professional traders consider this chart pattern as one of the most reliable chart patterns for the bullish trend reversal after a long decisive move. In the above figure, the Bottom 1 and bottom 2 formed at the key support zone indicates that the current downtrend is coming to an end.

Professional long-term traders wait patiently for the valid breakout of the neckline resistance which will confirm the bottoming of the oil price. Once the market successfully breaks the neckline traders opens their long position with a stop loss just below the neckline. Some conservative traders who are extremely cautious about their stop loss will still sit on the sideline after the successful breakout of the neckline. They will wait patiently for the market to retrace back to the support level so that they can have a better entry with much tighter stop loss. Since gold tends to show some extreme volatility at different economic major new release, traders shouldn’t be trading this chart pattern in the event of the major economic news release.


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