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 | ||
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.
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 what most chartists call the classic double bottom. Based on the performance rank, it's a terrific performer.
|
Overall performance rank (1 is best): 5 out of 39
Break even failure rate: 12%
Average rise: 50%
Throwback rate: 65%
Percentage meeting price target: 65%
The above numbers are based on 952 perfect trades. See the glossary for definitions. |
Eve & Eve Double Bottom |
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| Characteristic | Discussion | 
Identification Guidance
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| Price trend | Downward leading to the pattern. | |
| Shape | Two distinct valleys that look similar. Eve bottoms are wide and more rounded appearing. Spikes that appear tend to be numerous and short. | |
| Peak | The rise between bottoms should measure at least 10%, but allow variations. The figure to the right shows this for a typical double bottom. | |
| Bottom price | The 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. | |
| Separation | The twin valleys are several weeks apart with most falling in the 2 to 7 week range. The figure to the right shows this for a typical double bottom. | |
| Confirmation | The 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. | |
| Volume | Usually higher on the left bottom. |
More
A trading setup related to double bottoms and throwbacks is located here.
| Trading Tactic | Explanation |
The Measure Rule
Handle 
Flat Base 
Shelf |
|
| Measure rule | Reference the figure to the right. Compute the height from the highest peak (point 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 (the highest peak in the pattern, A) to get the 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 with few or no price consolidations along the way. Expect price to return to near where the downtrend began. | ||
| Confirmation | Wait 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 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 a handle. | ||
| 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, low | Double bottoms within a third of the yearly high or low perform best. Stay out of the middle. | ||
| Volume trend | A downward volume trend suggests good post breakout performance. | ||
| Shelf | When 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. | ||
| Throwbacks | Throwbacks hurt post breakout performance. |
More
The figure on the right shows an example of an 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.
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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