A series of lower highs and lower lows characterize downtrends while uptrends reverse this sequence with higher highs and higher lows. When trend is viewed as a repeating cycle, The Traders Wheel is born. Since a market cannot travel upward to infinity or downward below zero, a range develops within each time frame. Driven by fundamental and technical factors, trend inhales and exhales. Prices drop, inviting a new value crowd.
Prices then rise and momentum players jump on board.
On and on it goes. Double Bottoms exist as a direct result of this trend physics. The natural movement of impulse and reaction dictates that two unique patterns must develop at some point within each cycle. This second event marks the birth of a double bottom. The predictive power of double bottoms arises out of the trend that preceded it.