RSI Double Bottom Pattern Explained -- with David Moadel
hello and welcome to looking at the markets with David Modell combining the
double bottom pattern with the RSI can you do it well sure you can but I want
you to do it the right way so check out this video where I'm going to explain it
very briefly I'm using the Apple stock chart these are one-minute candles here
but these concepts could be applied to just about any timeframe really it could
be two minute candles five minute candles daily candles for our weekly
candles whatever it is you're using because really this is just math and the
RSI will adjust to the time frame or at least it should okay and also let me say
don't make any decisions just based on one pattern whether it's double bottom
RSI whatever I want you to do your own due diligence and make your own
decisions folks alright so and this does not work perfectly okay it does not work
100% of the time now you might be accustomed to looking for double bottom
patterns in stocks where the price goes down you know swing low and then comes
back up and then goes down to about that same area and then swings really high
okay and you're gonna try to capture that second swing high for a long
position and try to ride it up again does not work perfectly of course it
could go down the price can go down to the same area twice and then just keep
falling that's always possible but double bottom patterns are kind of
powerful because it's establishing that the market did not historically want to
take the price below a certain level at least twice okay so then perhaps it's a
sign that the sellers are exhausted and the buyers are stepping in and retaking
control of the price action well you can look for that in the candlesticks
themselves sure that's very common I've made
videos about the double bottom pattern but not a lot of people at least in my
experience spend a lot of time looking for that pattern in the RSI and the idea
with the RSI is that you're not just looking for a double bottom anywhere you
know I wouldn't look for it way up here above 70 for example that's not what I'm
looking for mostly I mean there are exceptions maybe
I'm looking for it there but mostly I'm looking for the stock price or the RSI
to go low and then form a double bottom pattern and then consider buying the
stock or whatever it is doesn't have to be stocks by the way it could be you
know again this is math so it could apply to just about anything commodities
crypto currencies whatever you're trading alright so mainly and I've got
the RSI I've got it on the 5 period look-back period ok and I've got it on
the standard settings 434 oversold below 30 is oversold and above 70s overbought
alright so pretty standard except for the look-back period I changed it from
14 to 5 alright so mainly I would be looking for the RSI line to go below the
oversold level which right here is 30 and then pop back above it and some
people get in after it pops back above 30 that's fine if you want to do that
but then the RSI line might go back below again and sometimes they get
discouraged they might even get stopped out whatever it is but you might want to
try with demo trading I recommend trying something out with demo trading or
virtual you know not real money before you actually try it with real money I
recommend testing it out with a demo trading you might want to try out not
using the stop-loss so quickly not being so quick to get
discouraged and exit your position if you you know buy if it goes below 30
then above on the RSI sometimes it'll go back below people that get discouraged
quickly they they get stopped out you may want to consider hanging in there
because it might form a double bottom on the RSI if it goes below 30 again and
then back above it we can see on the Apple stock that after that happened it
it didn't happen immediately sometimes you have to be very patient but it did
go up and up and up okay and if you knew when to take profits like above 70 for
example you would have done okay all right
you know like for example some people wait until it goes above 70 and then
goes back below it which would have been around here so which actually would have
been the right time as you can see that's just about where it peaked in
price okay but anyway so you may want to consider
looking for the double bottom pattern in the RSI that can be powerful just like
the double bottom in the candlesticks in the price action itself could be
powerful something to think about does it always work out this perfectly no of
course not okay so and the inverse of that would be it
did not happen here but if it went above 70 then below it then above it and then
below it again that would kind of be the inverse that might be a time to sell but
I think that the double bottom pattern is something that you could look for be
aware of it and if you see it that could be a kind of a hidden way of the market
forming double bottom because a double bottom is not obvious in the candles
themselves here but it is obvious here at least if you're looking for it kind
of a hidden double bottom okay in the RSI because not everybody puts the RSI
on their chart alright so again demo trade it try it out see if it works for
you you can try combining it with other indicators support and resistance
looking for candlestick patterns all that good stuff volume it's usually not
a bad idea to put the volume up there if you want to just to at least be aware of
it alright so I hope this was helpful and if you would like more help I do
offer coaching for trading for traders and investors and you can email me for
the coaching my name is David Modell and the email
dresses David Modell at gmail.com I hope this gave you something to look at and
something to think about for all of you RSI traders out there
thanks a lot I'll talk to you again soon