Setups 2 Trade – “Adam & Eve”Posted: October 23, 2012
Setups 2 Trade – “Adam & Eve”
Double tops and double bottoms come in four varieties (the links take you to the bottoms): Adam & Adam,Adam & Eve, Eve & Eve, and Eve & Adam. Each peak or valley is either wide or narrow. Wide ones are called Eve and narrow ones are called Adam.
But what is wide and what is narrow?
Answering that can be confusing for both novices and experts alike. Sometimes a chart pattern can be difficult to assess. However, I’ve created some identification rules.
Let’s discuss Eve bottoms and I show one in the chart of Lexmark (LXK) on the daily scale. Eve is wide, rounding appearing. If it has downward spikes, they are numerous and often short. Notice how the top of the Eve bottom is very wide. I denote that with a green line between points B andC.
Compare the width of BC with AB. Notice that the Eve bottom is much wider at its top than is the Adam top. That is one of the key ways of telling an Adam bottom or top from an Eve.
Adam peaks or valleys are narrow and remain slender as you move up (bottoms) or down (tops) the pattern. Often Adam will be composed of one long spike. Recall that Eve can have spikes, too, but they will be numerous and often short. Adam will have one or two and be quite long. The Adam bottom pictured in the chart shows such a long spike.
The chart shows, of course, an Adam & Eve double bottom. Imagine the same picture flipped upside down. The Adam and Eve peaks would retain the same characteristics. Eve peaks are wide and rounded appearing but Adam peaks are slender and pointed.
Adam and Eve Identification
To make identification easier, ask yourself if the two peaks or valleys look the same or different. If they are the same, then you are dealing with Adam & Adam or Eve & Eve. If one is wide and the other is narrow, then it is either Adam & Eve or Eve & Adam.
Now that you can identify the various combinations of Adam and Eve, so what? My book, Encyclopedia of Chart Patterns, Second
(pictured) discusses the details of Adam and Eve tops and bottoms. The various combinations behave differently so that if you can identify them correctly, you can use that information to your advantage.
Eve & Eve double bottoms, for example, tend to be star performers. Tests show that the average rise beats the other three combinations of Adam and Eve. Another example: Adam & Adam double tops have the lowest failure rate of the four combinations of Adam and Eve double tops.
When your son or daughter asks about Adam and Eve, you now have a wonderful bedtime story to tell them.
— Thomas Bulkowski