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The Adam & Eve double bottom is a chart pattern that performs best in
a bear market. In a bull market, however, it's just an average performer. Before trading, wait
for price to close above the peak between the two bottoms, confirming the Adam & Eve double
bottom as a valid chart
pattern. For more information see pages 229 to 243 of the book
Encyclopedia of Chart Patterns, Second Edition and read the following...
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Score your chart pattern for
performance by clicking
here |
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Important Bull Market Results
Overall performance rank (1 is best): 8 out of 23
Break even failure rate: 5%
Average rise: 37%
Throwback rate: 59%
Percentage meeting price target: 66%
Identification Guidelines
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Characteristic |
Discussion |
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Price trend |
Downward leading to the pattern |
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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. |
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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. |
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Bottom price |
The price variation between
bottoms is small. The two valleys should appear to bottom near the same price. |
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Separation |
The twin valleys are several
weeks apart with most falling in the 2 to 6 week range. Bottoms wider than 8 weeks and performance deteriorates. |
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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. |
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Volume |
Usually higher on formation
of the left valley. |
Trading Tips
A trading setup related to double bottoms and throwbacks is located here.
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Trading Tactic |
Explanation |
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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 (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). |
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Price reversal |
Price must have something
to reverse, so if the decline leading to the double bottom is small, expect a small rise. |
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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. |
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Confirmation |
Wait for confirmation – price
to close above the peak between the valleys. If you don’t wait, there’s a 64% chance that price will continue
lower without confirming the double bottom. |
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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.
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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. |
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Trends |
A short-term decline leading to
the double bottom results in the best postbreakout performance. |
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Yearly low |
Double bottoms within a third of
the yearly low perform best. The link to the left provides performance statistics
and this link provides more
information about buying near the yearly low. |
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Volume trend |
A downward volume trend suggests
good postbreakout performance. The link to the left gives an example and shows
other chart patterns that outperform after a downward volume trend.
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Throwbacks |
Throwbacks hurt postbreakout
performance. The link to the left gives an explanation of a throwback and this
link provides
performance statistics. |
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Adam & Eve Double Bottom Confirmation
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Measure Rule for Adam & Eve Double Bottoms
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Adam & Eve Double Bottom Handle
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Flat Base
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Example
The above figure shows an example of a Adam & Eve double bottom chart pattern. This is a perfect example. The Adam valley is pointed and Eve is wide, 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.
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