As of 11/20/2024
Indus: 43,408 +139.53 +0.3%
Trans: 17,002 -26.31 -0.2%
Utils: 1,055 +1.25 +0.1%
Nasdaq: 18,966 -21.33 -0.1%
S&P 500: 5,917 +0.13 +0.0%
|
YTD
+15.2%
+6.9%
+19.7%
+26.3%
+24.1%
|
 46,000 or 43,000 by 12/01/202418,000 or 16,600 by 12/01/20241,075 or 1,000 by 12/01/202420,000 or 18,400 by 12/01/20246,100 or 5,800 by 12/01/2024 |
As of 11/20/2024
Indus: 43,408 +139.53 +0.3%
Trans: 17,002 -26.31 -0.2%
Utils: 1,055 +1.25 +0.1%
Nasdaq: 18,966 -21.33 -0.1%
S&P 500: 5,917 +0.13 +0.0%
|
YTD
+15.2%
+6.9%
+19.7%
+26.3%
+24.1%
| |
|
46,000 or 43,000 by 12/01/202418,000 or 16,600 by 12/01/20241,075 or 1,000 by 12/01/202420,000 or 18,400 by 12/01/20246,100 or 5,800 by 12/01/2024 | ||
Updated with new statistics on 12/28/2020.
The third edition of this book
Encyclopedia of Chart Patterns
$ $ $
A stock forms a double bottom which confirms as a valid pattern when price closes above the top of the double bottom. Price rises no more than 10% before dropping and closing below the bottom of the chart pattern. This busts the upward breakout and the double bottom becomes a busted double bottom.
Shorting a stock showing a busted double bottom in a bull market is probably unwise since the average decline is just 15%, and that represents the results from almost 200 perfect trades. I'll discuss more performance statistics later.
The figure shows an example of a single busted double bottom (AB, busting at E). I highlight the top of the double bottom pattern (AB) with a blue line and the bottom of the pattern with another blue line. Yes, I like blue.
An Adam & Adam double bottom appears at AB. The price trend is downward leading to the start of the double bottom, as is nearly always the case (it's hard to see the downtrend in this example). After that, the two bottoms (AB) appear near the same price.
The stock breaks out upward from the double bottom when price closes above the highest peak between the two bottoms. That happens at C.
Price climbs to D but that is less than 10% above the breakout price (C), before the stock tumbles. The drop takes price down to E where it closes below the bottom of the double bottom. That busts the double bottom.
Price continues lower, more than 10% (F), to confirm a single busted pattern.
To identify a single busted double bottom, look for:
If price fails to drop more than 10% below the bottom of the double bottom, then it could be double busting.
I show another chart of Abbott Labs but the double bottom at AB is not ideal. Price on the B bottom is above the left one. If you're drunk, then you might blame this on your eyesight. If not, then I thought that the two bottoms were close enough in price to be acceptable, but it sure looks strange on this chart.
Price confirms the Adam & Adam double bottom at C when it closes above the top of the chart pattern. Price climbs only to D before dropping. The measure from the top blue line to D is less than 10%.
Price busts the double bottom at E when it closes below the low of the double bottom (below A). However, the stock only drops to F, which is less than 10% below the bottom blue line, before heading up to G.
At G, price closes above the top of the double bottom, busting it for the second time. To finish the double bust, price continues to rise to H and beyond, more than 10% above the top blue line.
For a double bust, look for these elements.
A double busted double bottom turns into a triple bust when the GH move is no more than 10% and price then closes below the bottom of the chart pattern.
I show a picture of Dell (DELL) on the daily scale. Price forms the double bottom at AB, which confirms when price closes above the top of the pattern at C.
Price climbs less than 10% before dropping to D, which closes below the bottom of the chart pattern, busting it for the first time.
Price drops no more than 10% before climbing to E and closing above the top of the double bottom. This busts the double bottom for a second time.
The move from the top blue line (the top of the chart pattern) to E is less than 10%. Then price drops to F. A close below the bottom of the chart pattern busts it for the third time. At this point, I stop counting the busts.
For a triple (or more) busted double bottom, look for the following:
Here's a few statistics from the book. This is for Eve & Eve double bottoms with upward breakouts (so they bust downward).
I show a picture of Advanced Micro Devices (AMD) on the daily scale. The double bottom is at AB which confirms when price closes above the top blue line, at C.
Notice that price climbs less than 10% above the blue line before dropping and closing below the bottom of the chart pattern at D.
When the stock closes below the bottom blue line, D, it busts the chart pattern. A conditional order to short the stock after the close would get you into the stock at the open the next day, at 16.41.
The stock drops and bottoms in December 1997 (below E) at 8.56 before bouncing up to 15.50. The decline measures 48%.
This example shows an unusually large decline. Do not expect similar results from your trades. Remember that the average decline after a busted double bottom is just 15%.
-- Thomas Bulkowski
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