Bulkowski’s Eve & Adam Double Tops

Written by and copyright © 2005-2009 by Thomas N. Bulkowski. All rights reserved.

For more information on this pattern, read Encyclopedia of Chart Patterns, Second Edition, pictured on the right, pages 307 to 320. That chapter gives a complete review of the chart pattern, including tour, identification guidelines, focus on failures, performance statistics, trading tactics, and sample trade. Below is just a sliver of the information contained in the book.

Adam is a term that describes how the top looks, in this case, Adam sports a narrow, pointed top, perhaps with a one-day upward spike. The Eve top is more rounded looking and wider. If Eve has spikes, they tend to be more numerous and shorter. Many times the difference between Adam and Eve is the width of each over their entire height. Adam tops tend to remain narrow but Eve tops widen substantially over their height. When trying to decide which is which, ask yourself if the two tops appear different or similar. With Eve & Adam, the two should look different (the first wide and the second narrow ).

Eve & Adam double tops do better in a bear market than in a bull market according to the performance rank. Pullbacks happen almost two-thirds of the time, so expect one after a downward breakout, especially if there is nearby underlying support.

Important Bull Market Results

Overall performance rank (1 is best): 13 out of 21 Break even failure rate: 13% Average decline: 15% Pullback rate: 64% Percentage meeting price target: 72%

Score your pattern for performance

Identification Guidelines

Characteristic	Discussion	Configuration
Price trend	Upward leading to the pattern.
Shape	Two distinct tops that look different. Eve appears first and is rounded looking and wider than Adam. Adam comes second and is narrow, an inverted V, often appears as a 1-day price spike.
Valley	The valley drop between the tops should measure at least 10%, but allow exceptions. The figure to the right shows the details.
Top price	The variation between price peaks is small, less than 3%. The two tops should appear to peak near the same price. Oddly, a large price variation suggests better post breakout performance. The figure to the right shows the details for generic double tops.
Separation	The twin peaks are several weeks apart with most falling in the 2 to 6 week range. The figure to the right shows the details.
Confirmation	The double top confirms as a true double top once price closes below the valley between the two peaks.
Volume	Usually higher on formation of the right peak. This is the only double top with that configuration.

Trading Tips

Trading Tactic	Explanation	The Measure Rule
Measure rule	Compute the height from the highest peak (B in the figure to the right) to the lowest valley (A) in the pattern then multiply by the above “percentage meeting price target.” Subtract the result from the breakout price (A) to get the target (C).
Price reversal	Price must have something to reverse, so if the rise leading to the double top is small, expect a small decline.
Confirmation	Wait for confirmation – price to close below the valley floor (point A in the figure to the right). If you don’t wait, there’s a 65% chance that price will continue higher without confirming the double top.
Trend end	If a double top appears after a long-term decline (meaning the double top appears as part of an upward retrace in a downtrend), confirmation of the top may mean that the end of the decline is near (10% to 20% below and a month away).
Trends	An intermediate-term rise (3-6 months) leading to the double top results in the best post breakout performance.
Yearly high	Avoid double tops in the middle of the yearly price range. They show the worst performance post breakout, but differences are small.
Volume trend	A downward volume trend between the peaks shows marginally better performance, post breakout.
Pullbacks	Pullbacks hurt post breakout performance.

Example

The figure on the right shows an example of an Eve & Adam double top chart pattern. The Eve top has several days at about the same price level. Adam has a long, single price spike. The two tops look different. Eve is wider than Adam and more rounded looking.

The Eve & Adam double top chart pattern confirms when price closes below the valley between the two tops, shown here as point A.

Price at point B attempts a pullback but does not quite make it up to the price level of the breakout (A).

Just by looking at this example, you can see that it fulfills the measure rule. That means the decline after this pattern confirms is well below the height of this pattern projected downward from A.

Other Examples

• Eve & Adam double top in Dow utilities.

-- Thomas Bulkowski