Bulkowski’s Eve & Eve Double Bottoms

Written by and copyright © 2005-2010 by Thomas N. Bulkowski. All rights reserved.

On pages 259 to 274 of my book, Encyclopedia of Chart Patterns, Second Edition, I reported on Eve & Eve double bottoms (pictured to the right). Some of the information I share with you here.

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 the best performing of the Adam and Eve combinations of double bottoms. It has a small break even failure rate and large average rise. The Eve & Eve double bottom is what most chartists call the classic double bottom.

Important Bull Market Results

Overall performance rank (1 is best): 6 out of 23 Break even failure rate: 4% Average rise: 40% Throwback rate: 55% Percentage meeting price target: 67%

Eve & Eve Double Bottom

Score your pattern for performance

Identification Guidelines

Characteristic Discussion 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. Bottoms wider than 7 weeks and performance deteriorates. 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.

The Measure Rule

Trading Tips

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

Trading Tactic Explanation Measure rule Reference the figure to the right. Compute the height from the highest peak (point A in the figure to the right) 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 64% 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 long-term decline leading to the double bottom results in the best post breakout performance. Yearly low Double bottoms within a third of the yearly low perform best. 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.

The Measure Rule Handle Flat Base Shelf

Example

The above figure shows an example of a 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.

-- Thomas Bulkowski