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Thomas Bulkowski’s successful investment activities allowed him to retire at age 36. He is an internationally known author and trader with 30+ years of stock market experience and widely regarded as a leading expert on chart patterns. He may be reached at

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Bulkowski's Eve & Eve Double Bottoms

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Market
Industrials (^DJI):
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As of 01/13/2017
19,886 -5.27 0.0%
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657 -0.99 -0.2%
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19,250 or 20,250 by 01/15/2017
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Written by and copyright © 2005-2017 by Thomas N. Bulkowski. All rights reserved. Disclaimer: You alone are responsible for your investment decisions. See Privacy/Disclaimer for more information.

On pages 259 to 274 of my book, Encyclopedia of Chart Patterns Second EditionEncyclopedia of Chart Patterns 2nd Edition book., I reported on Eve & Eve double bottoms (pictured to the right). Some of the information I share with you here.

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Eve is a term that describes how the bottom looks (when compared to Adam bottoms), in this case, a rounded looking and wide bottom. If Eve has spikes, they tend to be more numerous and shorter. Eve tends to widen over its height. Adam is a narrow bottom, often composed of a one-day spike. When trying to decide which is which, ask yourself if the two bottoms appear different or similar. With Eve & Eve, the two should look similar (both wide and rounded).

The Eve & Eve double bottom is the best performing of the Adam and Eve combinations of double bottoms. It has a small break even failure rate and large average rise. The Eve & Eve double bottom is what most chartists call the classic double bottom.

 

Important Bull Market Results for Eve & Eve Double Bottoms

Overall performance rank (1 is best): 6 out of 23
Break even failure rate: 4%
Average rise: 40%
Throwback rate: 55%
Percentage meeting price target: 67%

The above numbers are based on hundreds of perfect trades. See the glossary for definitions.

Eve & Eve double bottom chart pattern
Eve & Eve Double Bottom
Score your pattern
for performance

Eve & Eve Double Bottom Identification Guidelines

CharacteristicDiscussion
Price trendDownward leading to the pattern.
ShapeTwo distinct valleys that look similar. Eve bottoms are wide and more rounded appearing. Spikes that appear tend to be numerous and short.
PeakThe rise between bottoms should measure at least 10%, but allow variations. The figure to the right shows this for a typical double bottom.
Bottom priceThe price variation between bottoms is small, usually between 0% and 6%. The two valleys should appear to bottom near the same price. The figure to the right shows this for the typical double bottom.
SeparationThe twin valleys are several weeks apart with most falling in the 2 to 7 week range. Bottoms wider than 7 weeks and performance deteriorates. The figure to the right shows this for a typical double bottom.
ConfirmationThe double bottom confirms as a true double bottom once price closes above the peak between the two valleys. The figure to the right shows this as the top red line.
VolumeUsually higher on the left bottom.
The typical double bottom chart pattern setup
The Measure Rule
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Eve & Eve Double Bottom Trading Tips

A trading setup related to double bottoms and throwbacks is located here.

Trading TacticExplanation
Measure ruleReference the figure to the right. Compute the height from the highest peak (point A in the figure to the right) to the lowest valley (B) in the pattern then multiply it by the above “percentage meeting price target.” Add the result to the breakout price (the highest peak in the pattern, A) to get the target (C).
Price reversalPrice must have something to reverse, so if the decline leading to the double bottom is small, expect a small rise.
Big WLook for a double bottom with a tall left side, one with a steep decline and with few or no price consolidations along the way. Expect price to return to near where the downtrend began.
ConfirmationWait for confirmation – price to close above the peak between the valleys (point A in the measure rule figure to the right). If you don't wait, there's a 64% chance that price will continue lower without confirming the double bottom.
HandleSometimes price will confirm the double bottom then waffle up and down, forming a handle. When price breaks out of this region, it often moves up in a strong trend. The figure to the right shows a handle.
Flat baseExpect a large rise if the double bottom appears after a long, flat base. Use the weekly scale to find the flat base – the double bottom will look like a pothole in a road. The figure to the right shows an example.
TrendsA long-term decline leading to the double bottom results in the best post breakout performance.
Yearly lowDouble bottoms within a third of the yearly low perform best.
Volume trendA downward volume trend suggests good post breakout performance.
ShelfWhen a horizontal shelf appears on the right bottom (see the figure to the right), swing traders should buy in and exit if price stalls near the confirmation point (the peak between the two bottoms). The shelf becomes a support zone which lowers the risk of a failed trade.
ThrowbacksThrowbacks hurt post breakout performance.
Eve & Eve double bottom measure rule
The Measure Rule
Eve & Eve double bottom chart pattern with handle
Handle
Flat base followed by any chart pattern
Flat Base
Eve & Eve double bottom chart pattern shelf
Shelf
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Eve & Eve Double Bottom Example

Eve & Eve double bottom chart pattern example

The above figure shows an example of a Eve & Eve double bottom chart pattern. The two Eve bottoms are wide, rounded looking turns, not narrow, one-day price spikes which are typical of Adam bottoms. The right bottom pictured here is above the left bottom and you will see Eve & Eve double bottoms in this configuration. Just make sure that the two valleys bottom near the same price.

-- Thomas Bulkowski

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See Also

Written by and copyright © 2005-2017 by Thomas N. Bulkowski. All rights reserved. Disclaimer: You alone are responsible for your investment decisions. See Privacy/Disclaimer for more information. Help wanted: Telepath. You know where to apply.