As of 12/20/2024   Indus: 42,840 +498.02 +1.2%     Trans: 15,892 +32.54 +0.2%     Utils: 986 +14.76 +1.5%     Nasdaq: 19,573 +199.83 +1.0%     S&P 500: 5,931 +63.77 +1.1%	YTD  +13.7%   0.0%    +11.9%    +30.4%    +24.3%	Targets    Overview: 12/12/2024     44,200 or 41,750 by 01/01/2025   16,100 or 17,700 by 01/01/2025   1,050 or 975 by 01/01/2025   20,500 or 19,300 by 01/01/2025   6,100 or 5,775 by 01/01/2025
Chart Pattern Indicator: on 12/5/24

As of 12/20/2024   Indus: 42,840 +498.02 +1.2%     Trans: 15,892 +32.54 +0.2%     Utils: 986 +14.76 +1.5%     Nasdaq: 19,573 +199.83 +1.0%     S&P 500: 5,931 +63.77 +1.1%	YTD  +13.7%   0.0%    +11.9%    +30.4%    +24.3%
Targets    Overview: 12/12/2024     44,200 or 41,750 by 01/01/2025   16,100 or 17,700 by 01/01/2025   1,050 or 975 by 01/01/2025   20,500 or 19,300 by 01/01/2025   6,100 or 5,775 by 01/01/2025
Chart Pattern Indicator: on 12/5/24

Bulkowski on Adam & Adam Double Bottoms

Added trading lessons and article updated on 4/17/24.

Adam & Adam Double Bottoms: Overview

My book, Encyclopedia of Chart Patterns, 3rd Edition, pictured on the right, covers double bottom chart patterns extensively. Some of the information I share with you here.

Adam is a term that describes how the bottom looks, in this case, a narrow, pointed bottom, often composed of a one-day downward spike. Eve bottoms are more rounded looking and wider. If they have 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 bottoms tend to remain narrow but Eve bottoms widen over their height. When trying to decide which is which, ask yourself if the two bottoms appear different or similar. With Adam & Adam, the two should look similar (both narrow bottoms).

The chart pattern is a twin bottom formation that becomes a true double bottom when confirmed (that is, when price closes above the center peak). Only then is it safe to buy, but that does not guarantee success. If you buy the stock before confirmation, the probability of price continuing lower is 48%. Until confirmation, the squiggles on the chart are just that -- squiggles -- and not a double bottom.

Adam & Adam Double Bottoms: Bull Market Results

Overall performance rank (1 is best): 26 out of 39 Break even failure rate: 16% Average rise: 39% Throwback rate: 67% Percentage meeting price target: 73% The above numbers are based on 1,154 perfect trades. See the glossary for definitions.

Adam & Adam Double Bottom

Score your chart pattern for performance

Adam & Adam Double Bottoms: Identification Guidelines

Adam & Adam Double Bottoms: Trading Tips

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

Trading Tactic	Explanation	Measure Rule
Measure rule	Reference the figure to the right. Compute the height from the highest peak between the two bottoms (A) 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 (point A, the highest peak in the pattern) to get the target (C).
Stop	Place a stop loss order slightly below the lower of the two bottoms (point B in the figure to the right). Check to make sure the stop is not too far below the entry price. If so, then either raise the stop (try a volatility stop) or abandon the trade for a more promising setup.
Price reversal	Price must have something to reverse, so if the decline leading to the double bottom is small, expect a small rise.
Big W	Look for a double bottom with a tall left side, one with a steep decline and few or no price consolidations along the way down. Expect price to return to near where the downtrend began.	Handle
Confirmation	Wait for confirmation -- price to close above the peak between the valleys. If you don't wait, there's a 48% chance that price will continue lower without confirming the double bottom.
Handle	Sometimes 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 an example.
Flat base	Expect 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 lower right shows an example.
Trends	Anything except a short-term decline leading to the double bottom results in the best post breakout performance.	Flat Base
Yearly low	Double bottoms within a third of the yearly low perform best. The link to the left discusses performance and this link provides more information.
Volume trend	A downward volume trend happens most often. The link on the left shows an example and provides a list of chart patterns that perform best after a downward volume trend.
Throwbacks	Throwbacks hurt post breakout performance. The link to the left defines a throwback and this link discusses performance.

Adam & Adam Double Bottoms: Example

The figure shows an example of an Adam & Adam double bottom chart pattern. The two Adam bottoms are pointed needles with a good rise between them (point B) and they appear after a downward price trend. The Adam & Adam double bottom confirms as a valid chart pattern when price closes above point B, shown as the lower horizontal blue line.

To calculate a price target, subtract the price of the lower of the two Adam valleys from the price at peak B (the highest high between the two bottoms) to get the height. Multiply the result by 71% (the percentage meeting price target from Important Bull Market Results table near the top of this page) and add the result to B. That gives a target slightly above C. Even though price fell short of the target, overhead resistance highlighted by the green line doubled as a good price target, indicating profits should be taken near there.

Double Bottom: Trading Lessons

I present the information in slider format, so be sure to click the left or right arrows to view another slide.

Lessons Summary

• Slide 1. Buy a bullish double bottom during a retrace of the primary uptrend.
• Slide 2. Avoid a bullish reversal in a primary downtrend.

1 / 2

This chart shows an example of a double bottom forming as part of a retrace in an uptrend. The two thick red lines show the primary trend, which is up (daily scale). From time to time, a stock will pause and retrace a portion of the gain as the stock rises. In this case, the retrace formed a reversal pattern called a double bottom (DB on the chart). (Patternz found this double bottom, but it's probably better called a triple bottom.)

This setup, where the upward breakout from a double bottom rejoins the uptrend can lead to substantial gains (not always, of course). But it's a setup worth looking for.

The next chart shows the opposite example.

2 / 2

In this example, price is dropping (shown by the thick red lines). A double bottom acts as a reversal of the downtrend (because price moves UP to A, confirming the double bottom as a valid reversal), but when the stock rejoins the current, the reversal collapses and the stock continues lower (to B).

This is a setup that you'll want to avoid.

The end.

❮ ❯

-- Thomas Bulkowski

See Also

• Pattern pairs trading: Double bottoms, Adam & Adam
• Take this slider quiz on Adam & Adam double bottoms.
• Double bottoms, overview. Article explains the 4 varieties.
• Cat's Ears: A double bottom in a downward price trend.
• Busted double bottoms
• Double bottom trading setup.
• Score your chart pattern for performance.
• Eve & Adam double bottoms may be what you are looking for.
• Adam & Eve double bottoms perform best in a bear market.
• Eve & Eve double bottoms are the classic double bottom.
• What happens when a double bottoms grows a third bottom?
• Perhaps your double bottoms is really a right-angled and ascending broadening formation?

Give me ambiguity or give me something else.