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Eve & Adam double tops do better in a bear market than in a bull market according to the
performance rank. Pullbacks happen almost two-thirds of the time, so expect one after a downward breakout, especially
if there is nearby underlying support. For more information see pages 307 to 320 of the book
Encyclopedia of Chart Patterns, Second Edition and 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): 13 out of 21
Break even failure rate: 13%
Average decline: 15%
Pullback rate: 64%
Percentage meeting price target: 72%
Identification Guidelines
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Characteristic |
Discussion |
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Price trend |
Upward leading to the pattern |
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Shape |
Two distinct tops that look
different. Eve appears first and is rounded looking and wider than Adam. Adam comes
second and is narrow, an inverted V, often in a 1-day price spike.
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Valley |
The valley drop between the tops should measure at least
10%, but allow exceptions. The figure to the right shows the details.
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Top price |
The variation between price peaks is small, less than 3%.
The two tops should appear to peak near the same price. Oddly, a large price
variation suggests better postbreakout performance. The figure to the right shows
the details for generic double tops. |
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Separation |
The twin peaks are several weeks apart with most falling
in 2 to 6 week range. The figure to the right shows the details.
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Confirmation |
The double top confirms as
a true double top once price closes below the valley between the two peaks.
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Volume |
Usually higher on formation
of the right peak. This is the only double top with that configuration. |
Trading Tips
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Trading Tactic |
Explanation |
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Measure rule |
Compute the height from the highest peak (B in the figure
to the right) to the lowest valley (A) in the pattern then multiply by the above
“percentage meeting price target.”
Subtract the result from the breakout price (A) to get the target (C).
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Price reversal |
Price must have something
to reverse, so if the rise leading to the double top is small, expect a small decline. |
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Confirmation |
Wait for confirmation – price
to close below the valley floor (point A in the figure to the right). If you
don’t wait, there’s a 65% chance that price will continue higher without
confirming the double top. |
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Trend end |
If a double top appears after a
long-term decline (meaning the double top appears as part of an upward
retrace in a downtrend), confirmation of the top may mean that the end of the
decline is near (10% to 20% below and a month away). |
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Trends |
A short-term rise leading to the
double top results in the best postbreakout performance. |
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Yearly high |
Avoid double tops in the middle
of the yearly price range. They show the worst performance postbreakout, but differences are small. |
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Volume trend |
A downward volume trend between
the peaks shows marginally better performance, postbreakout. |
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Pullbacks |
Pullbacks hurt postbreakout performance. |
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 Measure Rule
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Example
The above figure shows an example of an Eve & Adam double top chart pattern. The Eve top has several days
at about the same price level. Adam top has a long, single price spike. The two tops look different. Eve
is wider than Adam and more rounded looking. The Eve & Adam double top chart pattern confirms when price closes
below the valley between the two tops, shown here as point A. Price at point
B attempts a pullback but does not quite make it up to the price level of the breakout
(A). Just by looking at this example, you can see that it fulfills the measure rule. The
decline after this pattern confirms is well below height of this pattern projected downward from A.
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