V bottom patterns are bullish patterns that look like the name they are called. Price moves to a peak level and starts to pull back or fall rapidly. Once the price has found a base, it makes a sharp, pointed reversal to the upside. Then, the price goes back up to the 1st peak level. Look for a breakout at the 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 the price can move to the top of the v,, breakout, hold, and continue upwards.
These patterns are known as reversal patterns. This pattern gets its name because of the shape that it forms on stock charts. It is pretty common in all time frames. You could think it’s a cup and handle pattern, but the bottom is too sharp. The cup and handle form a U, whereas these bottoms have moved sharp enough to form a V.
Check out this cup and handle pattern setup on a 15 min chart of $SPY
Basics
V bottom patterns form when the 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.
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Patterns Within Patterns
V patterns can be inside other patterns. Cup and handle patterns look similar to the V. While the cup and handle have a more rounded bottom forming the U, it still means the same thing.
The 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 resistance in the head and shoulders, forming the neckline.
Trading V Bottom Patterns
- Watch for V consolidation that ends up forming the V pattern
- Watch for the price to move up to resistance at the top of the V formation
- Next, look for a price to break out of the top of the V formation
- Then, watch if the price can hold the top of the V
- Traders take a long position once the top of the V breaks and holds. Place the stop halfway down the 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.
