Adam and Eve Pattern

Adam and Eve Pattern (Adam and Eve Pattern)

1. Overview

The Adam and Eve Pattern (Adam and Eve Pattern) is a rare chart pattern that indicates a trend reversal in the market and is classified as a type of “double top” or “double bottom.” This pattern occurs when price forms peaks or bottoms with different shapes on each side. The name comes from the shapes: a sharp V-shaped “Adam” and a rounded U-shaped “Eve.”

This pattern signals the end of an uptrend or downtrend and suggests the possibility of a new trend beginning.

2. Types of Adam and Eve Patterns

1. Adam & Eve Double Bottom (Adam and Eve Double Bottom)
   Characteristics:
   The first bottom is a sharp V-shape showing a rapid decline and rise, while the second bottom is a broader U-shape.
   Implication: A sign that the downtrend is ending and an uptrend may begin.
2. Adam & Eve Double Top (Adam and Eve Double Top)
   Characteristics:
   The first top is a sharp inverted V-shape, and the second top is a gentle inverted U-shape.
   Implication: A sign that the uptrend is ending and a downtrend may begin.

3. How to Identify and Confirm the Pattern

1. Confirm the prevailing trend
   First, check whether the current market is in a downtrend or an uptrend.
   Double bottoms appear after a downtrend, and double tops appear after an uptrend.
2. Check the shape of the bottoms or tops
   If the first shape is a sharp “V” or inverted “V,” it is “Adam.”
   If the second shape is a gentle “U” or inverted “U,” it is “Eve.”
3. Confirm the neckline
   The resistance or support line between the two bottoms (or tops) is called the “neckline.”
   When price breaks this line, the pattern is considered complete.
4. Confirm trading volume
   If an increase in volume can be confirmed during pattern formation, especially at the breakout, reliability increases .

4. Trading Strategies

1. Long entry on a double bottom
   Consider a buy entry when price breaks above the neckline.
   Set a stop-loss below the neckline.
2. Short entry on a double top
   Consider a sell entry when price breaks below the neckline.
   Set a stop-loss above the neckline.
3. Setting take-profit targets
   As a general rule, set the profit target by projecting the distance from the neckline to the bottom or top by the same amount from the breakout level .

5. Advantages and Disadvantages

Advantages:

• Provides clear entry points.
• Early indication of potential trend reversal.

Disadvantages:

• Risk of false signals. If not accompanied by volume, reliability decreases.
• Effectiveness is limited in sideways (range-bound) markets 【599】【601】.

6. Practical Examples

• Adam & Eve Double Bottom: After forming a sharp bottom, price forms a gentle bottom. Once the neckline is broken, price rises and a new uptrend is confirmed.
• Adam & Eve Double Top: After forming a sharp top, price forms a gentle top. When the neckline is broken to the downside, a new downtrend begins.

7. Summary

The Adam and Eve Pattern is a powerful tool that suggests trend reversals, and its accuracy improves when used in combination with other indicators and volume analysis. By applying this pattern correctly, you can build effective trading strategies.