Sentiment: Bearish
Direction: Reversal
What Is The Adam And Eve Top Chart Pattern?
An Adam and Eve Top is a double top formation consisting of a sharp, V-shaped top to create “Adam”, and a second rounded top creating the “Eve.”
Like other double tops, the pattern is confirmed with a break of neckline support.
How To Identify The Adam And Eve Top Pattern?
Like the double top, price action must meet a resistance trendline two times to form consecutive peaks roughly equal in size.
However, the peaks can take different times to form.
The top of the Adam peak forms quickly between 1 to 2 candles, while the top of the Eve peak takes multiple candles to form.
What Is The Psychology Behind The Chart Pattern?
The Adam and Eve Top pattern is a bearish chart pattern that is essentially the reverse of the Adam and Eve bottom pattern.
It’s characterized by two tops of approximately the same height, with the second top rounded and wider than the first (the “Adam” and “Eve” tops, respectively).
The pattern typically takes several weeks or months to form and is a sign of a potential trend reversal.
Traders interpret the pattern as a sign of a transition from a bullish market sentiment to a bearish market sentiment.
The pattern represents a period of indecision in the market, where buyers and sellers are evenly matched, but ultimately sellers gain momentum and push the price lower.
The psychology behind the Adam and Eve top pattern is that the two tops represent two periods of strong buying pressure, where buyers are in control and pushing the price higher.
However, sellers eventually step in and push the price lower towards the first trough, forming the “Adam” top.
The first trough represents a period of indecision in the market, where buyers and sellers are unsure of the direction of the trend.
As the pattern continues to form, the price moves higher again towards the second top, forming the “Eve” top.
The Eve top is rounded and wider than the Adam top, indicating that sellers have gained momentum and are pushing the price lower.
Once the price breaks below the trough between the two tops, it’s a signal that the trend has reversed, and traders may enter short positions.
Encyclopedia of Chart Patterns (Wiley Trading)
19% OffHow To Trade The Adam And Eve Top Pattern?
To trade the Adam and Eve Top top pattern, traders typically wait for the price to break below the trough between the two tops with a strong volume surge.
The breakdown should ideally occur on higher than average trading volume, as this confirms that there is significant selling pressure behind the move.
Traders may enter a short position once the price breaks below the trough, with a stop loss placed above the highest high between the two tops.
The profit target can be set based on the height of the pattern, with the expectation that the price will move at least the same distance as the pattern’s height in the direction of the breakdown.
Alternatively, traders may wait for a pullback to the trough before entering a short position.
This approach can provide a better risk-to-reward ratio, as the entry price is closer to the trough, and the stop loss can be placed tighter.
However, it may also result in missing out on some of the initial gains from the breakdown. Ultimately, the best approach will depend on the trader’s risk tolerance, trading style, and market conditions.
It’s worth noting that the Adam and Eve top pattern can also result in a false breakdown, where the price briefly breaks below the trough before reversing course.
Traders should be aware of this possibility. Also be sure to use technical indicators and other tools to confirm the validity of the breakout. Access these tools at TradingView.
Adam And Eve Top Performance Expectations Explained
A bearish pattern is expected to emerge when the support is breached.
To find potential targets, measure from the resistance to the lowest low of the troughs.
Project the measurement multiplied by 54% to the support.