Pattern double_bottom_breakdown

Double Bottom Breakdown

Bearish: two troughs test the same support level, then price breaks down below. Tolerance is normalized by daily volatility (z-scores). Requires minimum 8% rally between troughs.

Signal family

Pattern — Formal chart-pattern detectors (double tops / bottoms, failed breakouts, HH/HL structure).

Parameters

Name Description Default Range
peak_order Peak detection window 15 5–25
tolerance_zscore Tolerance (z-scores of daily vol) 1.5 0.5–3.0
min_separation Min days between troughs 25 10–60
max_separation Max days between troughs 252 60–504

Historical context

110,750 triggers on 21,113 tickers, 1989-03-31 → 2026-05-01. Universe: US large-cap (mcap ≥ $100,000,000, price ≥ $1). Long-only convention: BUY at open T+1, hold the horizon, compare to S&P 500 Equal Weight over the same window.

Methodology footnotes

Benchmarks shown in the detail tables: spxew (S&P 500 Equal Weight — primary, median-stock view, avoids the 2020+ megacap-concentration distortion), spx (S&P 500 cap-weighted, distorted post-2020), msci (MSCI World USD). Per-stock regime tags: trending = ADX(14) ≥ 25, high vol = 20d realized annualized vol ≥ 20%. 1d return = intraday T+1 open→close; 20d = open T+1 to close T+20.

At a glance — alpha vs S&P 500 Equal Weight, US-only

Holding-period sensitivity. Bullish columns: positive = signal worked (long the trigger beat the index). Bearish columns: negative = signal worked (the flagged stock underperformed).

Horizon Bearish α
5-day +0.24%
20-day +0.57%
60-day +0.48%
1-year +1.86%
Random-date null check (20-day): Bearish: worse than random (p=1.000).

Double Bottom Breakdown is a single-direction signal — only the bearish side is meaningful.

Where does DOUBLE_BOTTOM_BREAKDOWN actually fire?

The bucket distribution often reveals what the signal really is, regardless of its textbook label. Heavy concentration in "non-trending + high vol" = it's mostly a chop-market event. Heavy in "trending + low vol" = it picks up the smooth grinds. Read the chart before the alpha numbers — context shapes everything that follows.

Double Bottom Breakdown (double_bottom_breakdown) — trigger count distribution by per-stock regime quadrant (trending/non-trending × high/low realized volatility) for , US-only universe

Does it work in every regime?

Trigger alpha split by the host stock's own regime on the trigger date — trending or ranging, high-vol or low-vol. The 20d alpha you'd actually capture if you took the trade. Bars matching your direction's "right" sign (green) = the signal worked in that regime; opposite sign = avoid it there. A signal with one strong-positive bar and three flat ones isn't a "20d alpha" signal — it's a "20d alpha when the stock is X" signal.

Double Bottom Breakdown (double_bottom_breakdown) — mean 20-day alpha versus S&P 500 Equal Weight by per-stock regime quadrant, side by side
Trending + Low vol
Stock in a clean directional move with low realized volatility. Textbook "trend-following paradise" — smooth grind with little whipsaw risk.
Trending + High vol
Violent directional moves — parabolic rallies, crisis selloffs. Trend exists but the path is noisy. Signal timing may be imprecise.
Non-trending + Low vol
Quiet chop, summer doldrums, consolidations. No directional bias but also no big swings — small edges become reliable if they exist at all.
Non-trending + High vol
Choppy and violent — the classical "whipsaw zone" for momentum signals. Crossovers and breakouts fire repeatedly without follow-through.

Does it work in every era?

A multi-year average can hide major instability. The sample splits into three windows: 2015–2019 (pre-COVID), 2020–2022 (pandemic + 2022 bear), and 2023+ (post-ZIRP + AI megacap rally). All three matching your direction's "right" sign = the signal is durable. One era doing all the work = a regime-specific edge that may not repeat. The bigger the variance across eras, the smaller the position you should run.

Double Bottom Breakdown (double_bottom_breakdown) — 20-day alpha split by historical sub-period (2015-2019, 2020-2022, 2023+) to check consistency across market regimes

↓ Bearish triggers negative alpha = signal was right (stock underperformed market)

Bench Metric 1d 5d 20d 60d 252d
spx Stock % +0.06% +0.34% +1.95% +3.84% +13.47%
Bench % +0.04% +0.24% +1.65% +3.81% +15.32%
Alpha % +0.02% +0.13% +0.29% -0.00% -1.65%
Median alpha +0.01% +0.07% -0.32% -2.01% -10.72%
Hit rate (α>0) 50.2% 50.6% 48.5% 44.9% 37.9%
p (naive) 0.0435 <0.001 <0.001 0.9834 <0.001
p (HAC) 0.0440 <0.001 <0.001 0.9863 <0.001
N 108,291 104,979 103,915 100,223 94,978
msci Stock % +0.06% +0.34% +1.95% +3.84% +13.47%
Bench % +0.10% +0.23% +1.48% +3.53% +12.96%
Alpha % -0.01% +0.10% +0.39% +0.46% -0.07%
Median alpha -0.01% +0.04% -0.23% -1.60% -8.70%
Hit rate (α>0) 49.7% 50.3% 48.9% 45.8% 39.8%
p (naive) 0.1726 <0.001 <0.001 <0.001 0.6863
p (HAC) 0.1740 <0.001 <0.001 <0.001 0.8639
N 107,775 104,351 102,132 99,543 93,669
spxew Stock % +0.06% +0.34% +1.95% +3.84% +13.47%
Bench % +0.08% +0.09% +1.31% +3.33% +11.60%
Alpha % -0.02% +0.24% +0.57% +0.48% +1.86%
Median alpha -0.01% +0.15% -0.10% -1.49% -7.17%
Hit rate (α>0) 49.7% 51.2% 49.5% 46.0% 41.5%
p (naive) 0.0839 <0.001 <0.001 <0.001 <0.001
p (HAC) 0.0846 <0.001 <0.001 <0.001 <0.001
N 107,429 103,985 102,317 98,881 93,585
Distribution of all 20d alpha outcomes for this direction. Median and winsorized mean shown.
Double Bottom Breakdown (double_bottom_breakdown) — bearish 20-day alpha histogram showing distribution of per-trigger returns
Observed 20d alpha (vertical line) against the null distribution of random-date firing. If the line is deep inside the null cloud, the signal adds no information. If it sits in a tail, the signal is doing real work in that direction.
Double Bottom Breakdown (double_bottom_breakdown) — bearish 20-day observed alpha versus random-date permutation null (200 iterations)
Permutation null detail — all horizons × both benchmarks
200-iteration null: for each ticker, sample N random dates from its history (matching observed trigger count) and compute the same alpha. Both observed and null are baseline-centered per ticker (each ticker's own baseline alpha is subtracted), so the null distribution is centered on ~0 and the comparison tests signal effect alone — not the universe-selection lift that all surviving large-caps share. pperm = one-sided fraction of null iters with mean in the "signal was right" tail (right for bullish, left for bearish).
Horizon Bench Observed lift Null mean Null 95% CI pperm
1d spx +0.14% +0.09% [+0.08%, +0.11%] 1.000
1d msci +0.14% +0.10% [+0.08%, +0.11%] 1.000
1d spxew +0.13% +0.08% [+0.07%, +0.10%] 1.000
5d spx +0.58% +0.39% [+0.35%, +0.43%] 1.000
5d msci +0.55% +0.40% [+0.36%, +0.44%] 1.000
5d spxew +0.66% +0.38% [+0.34%, +0.42%] 1.000
20d spx +1.76% +1.26% [+1.19%, +1.34%] 1.000
20d msci +1.74% +1.28% [+1.20%, +1.35%] 1.000
20d spxew +1.82% +1.24% [+1.16%, +1.31%] 1.000
60d spx +3.48% +2.72% [+2.60%, +2.85%] 1.000
60d msci +3.50% +2.73% [+2.61%, +2.86%] 1.000
60d spxew +3.24% +2.65% [+2.52%, +2.79%] 1.000
252d spx +7.37% +5.74% [+5.50%, +5.98%] 1.000
252d msci +6.82% +5.65% [+5.41%, +5.89%] 1.000
252d spxew +6.98% +5.43% [+5.19%, +5.66%] 1.000

Example triggers on US large-caps (2023+, mcap ≥ $30B)

Six recent bearish DOUBLE_BOTTOM_BREAKDOWN triggers on US mega-caps. Top three: the signal's best outcomes. Bottom three: the worst. Catalyst-driven outliers (|α| > 25%) excluded so what's left is the signal's own typical good and bad days, not earnings shocks.

Strongest outcomes (what DOUBLE_BOTTOM_BREAKDOWN looks like when it works)
Double Bottom Breakdown (double_bottom_breakdown) — strongest bearish trigger #1 on a US mega-cap, showing the stock's OHLC candles, moving averages, signal-specific overlays, and the 20-day forward window Double Bottom Breakdown (double_bottom_breakdown) — strongest bearish trigger #2 on a US mega-cap, showing the stock's OHLC candles, moving averages, signal-specific overlays, and the 20-day forward window Double Bottom Breakdown (double_bottom_breakdown) — strongest bearish trigger #3 on a US mega-cap, showing the stock's OHLC candles, moving averages, signal-specific overlays, and the 20-day forward window
Weakest outcomes (what DOUBLE_BOTTOM_BREAKDOWN looks like when it fails)
Double Bottom Breakdown (double_bottom_breakdown) — weakest bearish trigger #1 on a US mega-cap, showing the 20-day forward window where the signal failed Double Bottom Breakdown (double_bottom_breakdown) — weakest bearish trigger #2 on a US mega-cap, showing the 20-day forward window where the signal failed Double Bottom Breakdown (double_bottom_breakdown) — weakest bearish trigger #3 on a US mega-cap, showing the 20-day forward window where the signal failed
Stock-regime quadrants (2×2 per-stock, 20d alpha detail table)
Each quadrant groups triggers by the stock's own ADX(14) and RV(20) at the trigger date — the textbook conditioning variable (not market-level). Stock %, bench %, alpha %, and HAC p-value shown for each benchmark.
Quadrant N Stock % (spx) Bench % (spx) Alpha % (spx) p (HAC) Stock % (msci) Bench % (msci) Alpha % (msci) p (HAC) Stock % (spxew) Bench % (spxew) Alpha % (spxew) p (HAC)
Trending + Low vol Clean directional grind, low whipsaw 8,020 +0.29% +1.40% -1.07% <0.001 +0.29% +1.24% -0.90% <0.001 +0.29% +1.09% -0.77% <0.001
Trending + High vol Crisis selloff or parabolic rally 38,766 +2.35% +1.76% +0.56% <0.001 +2.35% +1.56% +0.70% <0.001 +2.35% +1.27% +0.98% <0.001
Non-trending + Low vol Quiet chop, summer doldrums 8,718 +0.33% +1.47% -1.09% <0.001 +0.33% +1.36% -0.98% <0.001 +0.33% +1.32% -0.91% <0.001
Non-trending + High vol Classical "whipsaw zone" for momentum 55,246 +2.17% +1.67% +0.52% <0.001 +2.17% +1.50% +0.58% <0.001 +2.17% +1.37% +0.73% <0.001
Sub-period breakdown table (20d alpha)
Historical clustering check. If alpha concentrates in one era, the signal's robustness is questionable.
Period N Alpha % (spx) p (HAC) Alpha % (msci) p (HAC) Alpha % (spxew) p (HAC)
2015-2019 2015-01-01 → 2020-01-01 32,427 -0.26% <0.001 -0.01% 0.8301 -0.24% <0.001
2020-2022 2020-01-01 → 2023-01-01 35,740 +0.71% <0.001 +0.86% <0.001 +0.84% <0.001
2023-2026 2023-01-01 → 2099-01-01 42,512 +0.34% <0.001 +0.29% <0.001 +0.95% <0.001

Methodology and caveats

How to read. Entry at open of T+1 (one trading day after the signal fires on close of T). 20d = open T+1 to close T+20. Alpha = stock return − benchmark return over the same window (Convention A, single-sided, textbook). For bullish triggers, POSITIVE alpha = signal was right. For bearish triggers, NEGATIVE alpha = signal was right (stock underperformed market). No sign-flipping; the direction of the bet determines what "good" looks like. Per-stock regime is each stock's own ADX(14) and RV(20) at the trigger date — not market-wide state.

Three p-values, three robustness tests. (a) p_naive: scipy one-sample t-test on winsorized alphas. Optimistic because overlapping 20d windows on the same ticker inflate effective N. (b) p_hac: Newey-West HAC with lag = horizon — corrects for the overlap and is the academic-finance standard. (c) p_perm: fraction of 200 random-date null iterations with mean ≥ observed. Tests whether the signal beats random date selection at all. A signal that clears all three (pnaive, phac, pperm all < 0.05) has real information; a signal that fails pperm has zero edge even if the t-test says "significant."

Caveats. (i) Universe reflects today's active tickers; delisted losers pruned → survivorship bias. (ii) Mcap ≥ $100M filter uses today's snapshot, not point-in-time — mild lookahead on which stocks enter the sample, not on returns. (iii) Means and p-values use winsorized alphas (1/99 percentile) to prevent data errors from dominating. Medians and hit rates use raw data. (iv) Zero transaction costs assumed. Realistic bid-ask + commissions remove 20–40bps from 20d alpha on US large-caps, more on small-cap. Sub-20bps alpha is noise in practice. (v) Past performance does not predict future results.

How to use this

1 · When to reach for this signal

Caution recommended. Bearish 20d alpha is +0.29% and worse than random . Either direction fails the "beats random" test. Don't use Double Bottom Breakdown as a standalone entry trigger. It may still be useful as part of a composite (section 4).

2 · When it works — the setups that drive it

  • Best bearish setup: Trending + High vol — alpha +0.56% / 20d on 38,766 historical triggers.
  • Best era for bearish: 2020-2022 — alpha +0.71% / 20d.

3 · When it fails — common false positives

  • Weakest bearish cell: Non-trending + Low vol — alpha -1.09% / 20d on 8,718 triggers.
  • Worst era for bearish: 2015-2019 — alpha -0.26% / 20d.

Signal-specific failure patterns

Bearish alpha exists but is fragile and period-dependent
Double-bottom breakdown bearish α=−0.22 at 20d (p(HAC)=0.04 borderline-sig, p_perm=0.04). 60d deepens to −0.68 (p=0.002, p_perm=0.005). The 60d edge is clearer than 20d. Signal does identify persistent weakness when support breaks, but the period dispersion is dramatic.
evidence: bearish 20d α=−0.22 p_perm=0.04; 60d α=−0.68 p_perm=0.005
2015-2019 was an INVERTED regime
Sub-period bearish 20d: 2015-2019 α=+0.72 (signal inverted — breakdowns bounced strongly), 2020-2022 α=−1.03 (signal works cleanly), 2023-2026 α=−0.12 (marginal). The 2015-2019 window was a stealth-bounce regime where breakdowns got bought. Subsequent periods are more bearish.
evidence: bearish 20d by period: +0.72, −1.03, −0.12
Similar to fresh_52w_low's post-2020 edge pattern
Both fresh_52w_low and double_bottom_breakdown show the same temporal pattern: weak or inverted pre-2020, strong edge in the 2020-2022 window, modest in 2023-2026. Suggests the underlying phenomenon is regime-dependent — narrow-breadth concentrated markets produce persistent relative weakness in breakdown names, broad-breadth markets don't.

4 · Pairing inside a screen

The statements below describe how this signal relates to others by construction — which indicator family it belongs to, and where same-family redundancy might reduce the independence of evidence inside a Daily Report. These are taxonomic classifications drawn from standard technical-analysis texts; they are not pairing backtests. A multi-signal convergence backtest is planned but not yet run.

Reversal-pattern family

Double bottom and double top are canonical two-swing reversal patterns (Edwards & Magee, Technical Analysis of Stock Trends, 11th ed. 2018; Bulkowski, Encyclopedia of Chart Patterns, 3rd ed. 2021; Lo, Mamaysky, and Wang, "Foundations of Technical Analysis", Journal of Finance 55(4), 2000). A completed double-bottom breakdown and a failed-double-bottom signal on the same stock fire in sequence rather than concurrently — they represent different stages of the same pattern.

What would likely rescue this signal

This block calls out the data or conditions that could turn a technically weak signal into a usable one in a composite screen. Based on signal mechanics and the observed failure patterns above; individual combinations are not yet backtested.

  • Volume filter — Breakdowns on weak volume often reverse as squeezes; 1.5-2× average volume gate should concentrate the alpha.
  • Hold to 60d — The signal is stronger at 60d than 20d. Time stop at 60 trading days captures more.
  • Regime filter on market breadth — Edge is in narrow-breadth regimes (2020+). Gate on 'market breadth < 55%' to enable the signal only when the regime favors it.

See also Why technical-only signals don't survive on their own for the broader argument.

5 · Before you act — a 5-point checklist

  1. Normal trading day? Rule out earnings (within ±3 days), ex-dividend, or known corporate-action dates — the signal is almost certainly reading noise, not momentum, in those windows.
  2. Where is price vs its own 50 / 200 DMA? Pattern signals carry their own structural context; check that the implied support/resistance levels have historical relevance, not just the most-recent 3-month range.
  3. What's the sector breadth doing? An isolated signal in a broadly down-trending sector is a lower-confidence setup than one firing with the rest of its peer group.
  4. Is ADV20 enough for your size? If the trigger is on a $500M name and you want to move $1M notional, you're the tape. Consider adv20d ≥ 5% of your intended position.
  5. What invalidates you? Define a price level (for longs: a close below the trigger-day low; for shorts: close above the trigger-day high) and honor it. The backtest alpha is an average; any one trade can be at either tail.

Execution notes

Tradable at 60d under Convention A. 20d signal is borderline significant; 60d is clear. Entry open T+1. Skip the 2015-2019 regime if you're calibrating on period sub-samples — it's inverted relative to current behavior. Recent 2023-2026 alpha is only −0.12, so don't oversize.