Many investors on Wall Street are searching desperately for some kind of bottom to begin to appear in the broad markets. They've looked to support and resistance, volume, the Volatility Index (VIX), the Put/Call ratio and numerous other oversold indicators. Traders have looked in just about every nook and cranny for a clue, something, anything, they can sink their teeth into. For most of us picking a top or bottom is an exercise in futility. The majority of traders should probably be perfectly content to capture their piece of the pie from somewhere in the middle of a trend, once that trend has been established.

Over the past few months we've heard many analysts in the media suggest there could be another retest of the May lows in the NASDAQ. At the time, many market participants probably either hoped the market gurus were way off base in their theory or simply turned a deaf ear to the comments. So have we finally made a bottom? Unfortunately we don't have an answer to that $64,000 question. We are going to take a look at several different patterns that typically develop after a stock or index runs out of sellers. While fundamental news of the economy, a sector or a company obviously plays a big part in the development of these patterns, we are just going to view the technical picture for now.

One of the first that comes to mind was the fairly sharp turnaround experienced last May. Most technicians would view the reversal in May as a "V" formation or "spike". Although it is too early to tell for sure, the reversal seen Friday in the NASDAQ is only a bounce, but could probably qualify as a "V" formation if the buying continues over the near-term. In May, the COMPX was approaching support near 3000, when the bulls stepped in and promptly began to bid prices higher. The trading that particular day had all the makings of a rebound. A capitulation on strong volume, followed by traders stepping in with buy orders and the index closing near its high of the session. The action could certainly given some investors the confidence to jump in and at least test the waters. There were other signs of a possible turn around in terms of divergence in other technical indicators that might have boosted investor confidence as well. A similar chart pattern developed on August 3, when the COMPX retraced to the 3,500-level, turned on a dime, and began to trend higher into the end of the month.

Another pattern that makes traders set-up and take notice are double tops and bottoms. For now we'll concentrate on the latter. A study of intra-day, daily or weekly charts shows most of the same characteristics apply regardless of the time frame followed. Double bottoms resemble a "W". Typically a bottom is made, followed by a rebound on lighter volume, which gives way to more selling. A retest of the first low is made followed by another rally. The double bottom pattern becomes complete when the second rally breaks through resistance where the first rally left off. Traders often view the move through resistance as a reasonable entry point. Depending on your risk profile, traders may need to be prepared to weather one more test of the previous low. Although not a classic double bottom pattern, a look back at General Electric(GE) shows a fairly good example of the formation.

GE ran out of steam near the end of December as it approached the $54 level. The conglomerate trended lower until the middle of February when support in the form of $41 and the 200-dma came into play. The next two weeks GE was bid up to the $46 area, when the bears stepped in again pushing the stock back down to support. The low the second go around came in near $42 as the 200-dma again brought buyers back to the table on March 15. The time frame involved took about a month to complete, around 20 trading days. Depending on the sentiment and volatility in the markets or an individual stock, the pattern can take more or less time to develop. Traders who took a position on March 17 when GE broke through resistance at $46 found a respectable profit in their account a week later as the investors bid shares of the company's stock up near the $55 mark. Unfortunately, GE made little progress after running into resistance, but the completion of the double bottom did offer a reasonable entry for those considering a play in GE.

A saucer bottom is another chart formation of interest to those in the trading world. It is probably much less frequent than others. However completion of a saucer bottom can also be viewed as a potentially attractive entry. The pattern is exactly as the name implies, a rounded bottom, which looks something like a bowl. The volume tends to decrease at the bottom of the bowl and gradually increases as prices move higher. The pattern is complete when prices move through resistance at the right edge of the saucer or bowl. These types of patterns usually don not develop in the volatile markets we've come to know and love, however when they do appear, can give traders a good entry into their favorite stock.

Another pattern that takes a time to develop but can offer outstanding entries when complete was seen in Proctor & Gamble(PG) this summer. It is probably most often referred to as an "ascending triangle" pattern. This is by no means a suggestion to go out and load up on shares of PG at this time, but the chart pattern that developed from early July to the end of September is one to study and be on the lookout for. At the end of June the household products company retested its March low, near $53. Prices consolidated for a few days, and then gradually moved higher. PG ran out of gas near $62 and turned back south. The $55-$56 area provided decent support until the next run up, this time to the $64-$65 level. The next down turn saw the bears give up near $60. Get the idea? Not a lot of momentum to the upside, but higher-lows on each subsequent downturn. Near the end of September, PG pushed through resistance between $64 and $65 and made its way up near the $75 level. The pattern took nearly three months to develop, before a solid breakout was confirmed. Notice the angle of trend line that began to develop on each pullback while the tops remained fairly constant. Traders certainly could have entertained opening a position on the bounces off the bottom trend line if they were so inclined. Again we are not touting PG stock, rather pointing out the chart pattern that developed.

So what kind of pattern will we see take form? At this point we really don't know. As we said above, most of the time we don't know for sure that a bottom has actually been put in until well after the fact. Gunslingers will continue buy what they believe is a bottom, but most of the time they only end up shooting themselves in the foot. For the few that do step in and take a stand, and live to tell about it, enjoy your victory, the next time you may not be so lucky. How's that old clichéd go? "I'd rather be lucky than good." Unless you're THAT lucky, most of the time we believe it is more prudent to wait for conformation of a bottom, before loading on your favorite stocks. Speaking of your favorite stocks. We are adding a new feature to Trading 101. We invite our readers to send in their technical questions on stocks you are following. We will not be able to give specific advice on whether to buy, sell, or hold, - but would be happy to respond with our view of the current technical picture.