[Cryptocurrency] In-depth Analysis of Bottom Patterns | How to Double Your Profits During a Crash. The 5 Strongest Bottom-Fishing Patterns

Head and Shoulders Bottom Pattern It often appears at the end of a downtrend and is a very classic and reliable reversal signal. The pattern structure is as follows: the price first forms a valley, which is the left shoulder, then slightly rebounds to point 1, then continues to decline, making a new low and forming a deeper valley, which is the head. Although at this moment the downtrend looks very strong, the subsequent rebound is also vigorous, returning to a level similar to the previous high at point 2, indicating that buying pressure is beginning to strengthen. Then it falls back again but does not break the previous low formed by the head, forming the right shoulder, and finally surges strongly upward. How to confirm that the head and shoulders bottom pattern is truly formed? The key point is the breakout of the neckline, which is the line connecting the high points of the left and right shoulders’ rebounds. When the price breaks through the neckline, it means the downtrend has officially ended, and a buy signal is confirmed.

So, how to view the upward target? Usually, you can take the lowest point of the head to the neckline height as a reference, and add the same height to the breakout point to get an approximate target level.

Double Bottom Pattern It looks like the letter W, composed of two lows, and is a typical bottom reversal signal. The formation process is simple: the price first drops to low point 1, then rebounds to point 2, then falls back again to around point 3. If the second time it can hold above lows 1 and 3 and rebound, it indicates strong buying support in this area, leading to a powerful upward move. How to confirm that the double bottom is truly formed? Again, the key is the breakout of the neckline, which here is the horizontal line extended from high point 2. When the price breaks through this line, it officially enters an uptrend, completing the double bottom pattern. This is also the buy point. There are two points to pay attention to regarding entry timing: First: Always wait for the breakout of the neckline before entering, because not all bottom rebounds succeed. Some prices may be resisted near the neckline and fall again. Therefore, the most reliable approach is to wait for confirmation of the breakout before considering buying. Second: Don’t rush in just because the double bottom pattern has just formed. Many people think that since the price rebounded near the previous low, it won’t fall again, but in reality, the trend has not fully reversed yet. Only after breaking the neckline can we truly confirm an uptrend.

So, how to view the upward target? Usually, take the height from the lowest point to the neckline as a reference, and add the same height to the breakout point to estimate a target level.

Let’s compare the double bottom and head and shoulders bottom: Double bottom pattern: has only two lows and is relatively simple. Head and shoulders bottom has three lows, with the middle being the deepest and the sides shallower. The signal is stronger, so it is generally considered a more favorable buy signal than the double bottom.

Cup and Handle Pattern It looks like a coffee cup with a handle. First, a U-shaped bottom appears, then a slight pullback on the right side forming a small handle, and finally breaking through the previous high, which accelerates the market. This pattern has four key points: First: there must be a clear upward trend beforehand. If the market itself lacks momentum, the pattern won’t form. Second: the bottom should be U-shaped rather than V-shaped, meaning a slow decline followed by a slow recovery, indicating the market has undergone sufficient correction. Third: the handle’s pullback should not be too deep, generally within 1/3 of the cup’s height to be healthy. Fourth: the trend resumes upward.

Why does this pattern appear? Analyzing from investor psychology, after a big rally, some investors take profits, causing a slow decline and forming the cup mouth. Then, investors buy back in batches over several days, forming a relatively slow cup bottom.

When reaching the bottom, funds buy in batches, gradually pushing the price up. Approaching the previous high, some traders fear a pullback and sell, causing a small correction at the handle position.

When the price breaks through the handle, market confidence is fully restored, and buying pressure surges, accelerating the upward movement. In trading, note that the real buy point is when the price breaks the neckline, not just when the cup appears.

Shallow Dish Handle Pattern It looks like a teacup with a shallow dish underneath, and a small handle on the right. Compared to the cup and handle, the pullback is smaller, and the trend is more gentle. The logic of this pattern is similar to the cup and handle: the market first experiences a gentle decline and recovery, forming a shallow dish, then a brief small pullback on the right side (the handle). If the price breaks through the dish’s neckline, the pattern is confirmed. Be aware that not all formations resembling a dish will succeed; sometimes they fail near the neckline and turn downward. Therefore, the true buy point is when the price breaks the neckline and moves upward, not just upon seeing the pattern.

Diamond Bottom Pattern It is a relatively rare pattern but often very powerful once it appears. The diamond bottom usually occurs at the end of a downtrend, indicating a possible reversal upward. Initially, we see a rapid decline from the high on the left, showing dominance by bears. After reaching the bottom, there is a rebound, but it is quickly pushed back down. Then, the price drops again, forming a new low, but this time it does not break the previous low, indicating weakening selling pressure. Subsequently, the price oscillates within a range, with highs and lows gradually narrowing, forming a diamond-shaped consolidation. When the price breaks above the red resistance level with increased volume, market confidence returns, and the diamond bottom pattern is confirmed, usually signaling the start of a new upward wave, which is a buy signal. The same caution applies here: false breakouts are common. Sometimes the price may fake a breakout and then quickly reverse. The safest approach is to wait for confirmation before entering, avoiding premature decisions.