V bottom patterns are a bullish pattern that look like the name that they are called. Price moves up to a peak level and then starts to pull back or fall rapidly. Once price has found a base, it makes a sharp pointed reversal to the upside. Then, price goes back up to the 1st peak level. Look for breakout at top of v to confirm continuation.
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What Are V Bottom Patterns?
A v bottom pattern consists of several consolidation candlesticks that form a v pattern. This pattern looks like the cup and handle pattern without the handle. And the shape is a v instead of a u. Watch if price can move to the top of the v then breakout, hold, then continue upwards.
These patterns are known as reversal patterns. This pattern gets their name because of the shape that they form on stock charts. It is pretty common on all time frames. You could think it’s a cup and handle pattern but the bottom is too sharp. The cup and handle forms a U whereas these bottoms have moved sharp enough to form a V.
Basics
V bottom patterns form when price creates the V shape at a support level. Price falls sharply then reverses and the breakout occurs when resistance is broken. The resistance level is the top of each side of the pattern.
The beginning of V consolidation patterns and the end of the V pattern are pretty level. This forms a pretty strong resistance level. This level must be broken for the stock to continue up.
The bottom of the pattern is a strong support level. Once the stock touches that level it usually shoots back up.
Patterns Within Patterns
V patterns can be inside other patterns. Cup and handle patterns are very similar looking to the V. While the cup and handle has the more rounded bottom forming the U, it still means the same thing.
Price is about to reverse. You may see what looks like a handle next to the V. This is consolidation or a pullback before another move.
These consolidation patterns can also be a part of an inverse head and shoulders pattern. The V formation creates the head and shoulders with resistance forming the neckline.
How to Trade V Bottom Patterns
- Watch for V consolidation that ends up forming the V pattern
- Watch for price to move up to resistance at top of the V formation
- Next, look for price to break out of the top of V formation
- Then, watch if price can hold the top of the V
- Traders take a long position once the top of the V breaks and holds. Place stop halfway down right side of the V
V bottom patterns are pretty reliable reversal patterns. The safest way to trade this pattern is to trade the breakout. This occurs when the resistance level is broken.
