Adam and Eve Double Bottom Pattern
- This pattern is observed during a downward trend.
- It indicates a trend reversal and a bullish rally is seen thereafter.
- Since it’s a double bottom pattern, two valleys are observed.
- The first one being Adam, a narrow V shaped bottom and the second one being Eve which is more wider and rounded, like U.
- The rise between both the valleys should be atleast 10% higher, whereas the difference between both the price bottoms should be very less.
- The average time interval between the formation of both the valleys is 1 months.
- This pattern is observed only after the price goes above the peak after the second valley is formed, leading to a trend reversal.
- Moreover, there is a huge volume near the Adam valley compared to the Eve valley..
This is the 1day chart of Maruti Suzuki (BSE) around Oct, 2018
The price difference between Adam bottom and the peak is around 600, indicating a 10% difference in price level
The price rose from Rs.7300 to rs.7900 after breakout
- Compute the difference between the Adam valley and peak between the valleys. Multiply it with the percentage meeting price target (~65%) and add the value to the breakout, to get the upward target range. Similarly, mark the stop below the Eve valley.
- Traders can enter the market after the breakout and initiate their long position in the market. Their target price and stop price, both are marked using the above calculation.
- However, there is only 35% probability that the price rises after the double head pattern occurs. Hence, it is not a reliable pattern.
- The pattern is more reliable when there is a volume decline during the pattern formation. It is also reliable when there is a flat base before the formation of the pattern.