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%
|
 44,200 or 41,750 by 01/01/2025 16,100 or 17,700 by 01/01/20251,050 or 975 by 01/01/202520,500 or 19,300 by 01/01/20256,100 or 5,775 by 01/01/2025 |
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%
| |
|
44,200 or 41,750 by 01/01/202516,100 or 17,700 by 01/01/20251,050 or 975 by 01/01/202520,500 or 19,300 by 01/01/20256,100 or 5,775 by 01/01/2025 | ||
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.
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Added trading lessons and article updated on 4/17/24.
Adam is a term that describes how the bottom looks, in this case, a narrow, pointed bottom, perhaps with 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 & Eve, the two should look different (the first bottom is narrow and the second is wide).
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Overall performance rank (1 is best): 17 out of 39
Break even failure rate: 12%
Average rise: 43%
Throwback rate: 67%
Percentage meeting price target: 69%
The above numbers are based on 1,020 perfect trades. See the glossary for definitions. |
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| Characteristic | Discussion |
 Adam & Eve Double Bottom Confirmation
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| Price trend | Downward leading to the pattern. | ||
| Shape | Two distinct valleys that look different. Adam bottoms appear first and are narrow, V-shaped, sometimes with one long price spike. Eve bottoms appear after Adam and are wide and more rounded looking. Spikes that appear tend to be more numerous and shorter on Eve bottoms. | ||
| Peak | The rise between bottoms should measure at least 10%, but allow variations. Tall patterns perform better. The link discusses performance of short and tall chart patterns. | ||
| Bottom price | The price variation between bottoms is small. The two valleys should appear to bottom near the same price. | ||
| Separation | The average separation between bottoms is almost two months. | ||
| Confirmation | The double bottom confirms as a true double bottom once price closes above the peak between the two valleys. See the figure to the right. Without confirmation you do not have an Adam & Eve double bottom, just squiggles on a chart. | ||
| Volume | Usually higher on formation of the left valley. |
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A trading setup related to double bottoms and throwbacks is located here.
| Trading Tactic | Explanation | 
Measure Rule for Adam & Eve Double Bottoms
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| Measure rule | The link to the left gives more information about the measure rule. Compute the height from the highest peak between the two bottoms (point A in the figure to the right) to the lowest valley (B) in the Adam & Eve double bottom and then multiply it by the above 'percentage meeting price target.' Add the result to the breakout price (A, the highest peak in the pattern) to get the price target (C). | |
| 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. Expect price to return to near where the downtrend began. The link to the left discusses the Big W chart pattern. | |
| 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. |
Adam & Eve Double Bottom Handle
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| 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. See the chart to the right. | |
| 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 right shows an example. | |
| Trends | A short-term decline leading to the double bottom results in the best post breakout performance. | |
| Yearly high | The best performance comes from pattern with breakouts within a third of the yearly high. The link to the left provides performance statistics and this link provides more information about buying near the yearly low. |  Flat Base |
| Volume trend | A downward volume trend suggests good post breakout performance. The link to the left gives an example and shows other chart patterns that outperform after a downward volume trend. | |
| Throwbacks | Throwbacks hurt post breakout performance. The link to the left gives an explanation of a throwback and this link provides performance statistics. |
More
The figure on the right shows an example of an Adam & Eve double bottom chart pattern. This is a perfect example.
The Adam valley is pointed and narrow whereas Eve is wide and flat. The contrast between the two is startling enough that it will probably keep you awake at night wondering how such a pattern could occur.
Confirmation, when the squiggles turn into a true Adam & Eve double bottom, occurs when price closes above the blue line shown in the figure. Price makes a hefty advance thereafter in this example.
I present the information in slider format, so be sure to click the left or right arrows to view another slide.
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.
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.
-- Thomas Bulkowski
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