A fulcrum bottom is a rare and complex chart pattern used in technical analysis to identify potential reversals from downtrends to uptrends. It's primarily found in point-and-figure charts, which focus on price movements instead of time intervals.
Here's a breakdown of the key characteristics of a fulcrum bottom:
Formation: It resembles a mirrored head-and-shoulders (H&S) pattern, where two lower lows (representing the shoulders) form on either side of a central low (representing the head).
Price action: After the second "shoulder," the price typically consolidates or trades sideways for a period before breaking above the neckline (a trendline connecting the highs of the "shoulders").
Volume: Ideally, volume should increase during the breakout above the neckline, confirming the bullish reversal.
Important notes:
Fulcrum bottoms are considered rare and require careful confirmation before being used for trading decisions.
They should not be confused with regular double bottoms, which are more common and have different technical specifications.
Like any technical indicator, fulcrum bottoms should be used in conjunction with other forms of analysis to make informed trading decisions.
Additional points to consider:
Some analysts differentiate between simple fulcrum bottoms and compound fulcrum bottoms, which involve a more intricate H&S formation within the overall pattern.
The potential upside target after a fulcrum bottom breakout is often estimated by measuring the vertical distance between the neckline and the head of the pattern.
Fulcrum Bottom Example:
