Pattern failed_double_bottom

Failed Double Bottom Breakdown

Bullish reversal: price broke below support (double bottom breakdown) but then rises back above the support level. Bears are trapped. Failure threshold normalized by daily volatility.

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
failure_window Max days for failure after breakdown 60 20–120

Historical context

77,180 triggers on 20,144 tickers, 1993-01-29 → 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 Bullish α
5-day -0.32%
20-day -0.34%
60-day -0.59%
1-year +0.85%

Sign flip across horizons. Bullish triggers go from -0.32% (5d) to +0.85% (1y) — short-term fade but longer holding recovers and wins.

Random-date null check (20-day): Bullish: worse than random (p=1.000)

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

Where does FAILED_DOUBLE_BOTTOM 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.

Failed Double Bottom Breakdown (failed_double_bottom) — 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.

Failed Double Bottom Breakdown (failed_double_bottom) — 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.

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

↑ Bullish triggers

Bench Metric 1d 5d 20d 60d 252d
spx Stock % -0.06% -0.09% +0.69% +2.04% +12.26%
Bench % +0.03% +0.31% +1.21% +3.34% +14.74%
Alpha % -0.11% -0.40% -0.53% -1.36% -2.47%
Median alpha -0.15% -0.66% -1.53% -3.50% -11.32%
Hit rate (α>0) 46.6% 44.1% 43.2% 40.9% 37.1%
p (naive) <0.001 <0.001 <0.001 <0.001 <0.001
p (HAC) <0.001 <0.001 <0.001 <0.001 <0.001
N 75,016 72,384 71,522 69,310 64,153
msci Stock % -0.06% -0.09% +0.69% +2.04% +12.26%
Bench % +0.06% +0.28% +1.00% +2.84% +12.12%
Alpha % -0.12% -0.38% -0.33% -0.82% -0.61%
Median alpha -0.20% -0.65% -1.36% -3.04% -9.17%
Hit rate (α>0) 45.8% 44.2% 43.8% 42.1% 39.0%
p (naive) <0.001 <0.001 <0.001 <0.001 0.0025
p (HAC) <0.001 <0.001 <0.001 <0.001 0.1939
N 74,445 71,544 70,580 68,957 62,640
spxew Stock % -0.06% -0.09% +0.69% +2.04% +12.26%
Bench % +0.04% +0.23% +0.98% +2.56% +10.90%
Alpha % -0.12% -0.32% -0.34% -0.59% +0.85%
Median alpha -0.17% -0.55% -1.37% -2.85% -7.73%
Hit rate (α>0) 46.6% 44.9% 43.9% 42.5% 40.7%
p (naive) <0.001 <0.001 <0.001 <0.001 <0.001
p (HAC) <0.001 <0.001 <0.001 <0.001 0.0701
N 74,461 71,265 70,149 68,334 62,433
Distribution of all 20d alpha outcomes for this direction. Median and winsorized mean shown.
Failed Double Bottom Breakdown (failed_double_bottom) — bullish 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.
Failed Double Bottom Breakdown (failed_double_bottom) — bullish 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 +0.02% +0.09% [+0.08%, +0.11%] 1.000
1d msci +0.04% +0.10% [+0.08%, +0.11%] 1.000
1d spxew +0.03% +0.08% [+0.07%, +0.10%] 1.000
5d spx +0.07% +0.39% [+0.34%, +0.44%] 1.000
5d msci +0.08% +0.39% [+0.35%, +0.44%] 1.000
5d spxew +0.11% +0.37% [+0.33%, +0.42%] 1.000
20d spx +0.89% +1.25% [+1.14%, +1.33%] 1.000
20d msci +0.98% +1.26% [+1.16%, +1.35%] 1.000
20d spxew +0.86% +1.22% [+1.12%, +1.30%] 1.000
60d spx +1.86% +2.69% [+2.54%, +2.83%] 1.000
60d msci +1.96% +2.70% [+2.56%, +2.86%] 1.000
60d spxew +1.89% +2.62% [+2.46%, +2.77%] 1.000
252d spx +5.67% +5.59% [+5.35%, +5.86%] 0.264
252d msci +5.38% +5.50% [+5.28%, +5.76%] 0.836
252d spxew +5.15% +5.25% [+5.02%, +5.49%] 0.756

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

Six recent bullish FAILED_DOUBLE_BOTTOM 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 FAILED_DOUBLE_BOTTOM looks like when it works)
Failed Double Bottom Breakdown (failed_double_bottom) — strongest bullish trigger #1 on a US mega-cap, showing the stock's OHLC candles, moving averages, signal-specific overlays, and the 20-day forward window Failed Double Bottom Breakdown (failed_double_bottom) — strongest bullish trigger #2 on a US mega-cap, showing the stock's OHLC candles, moving averages, signal-specific overlays, and the 20-day forward window Failed Double Bottom Breakdown (failed_double_bottom) — strongest bullish 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 FAILED_DOUBLE_BOTTOM looks like when it fails)
Failed Double Bottom Breakdown (failed_double_bottom) — weakest bullish trigger #1 on a US mega-cap, showing the 20-day forward window where the signal failed Failed Double Bottom Breakdown (failed_double_bottom) — weakest bullish trigger #2 on a US mega-cap, showing the 20-day forward window where the signal failed Failed Double Bottom Breakdown (failed_double_bottom) — weakest bullish 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 2,212 -0.24% +0.59% -0.78% <0.001 -0.24% +0.44% -0.65% <0.001 -0.24% +0.33% -0.54% 0.0007
Trending + High vol Crisis selloff or parabolic rally 31,904 +0.80% +1.45% -0.70% <0.001 +0.80% +1.12% -0.42% <0.001 +0.80% +1.18% -0.49% <0.001
Non-trending + Low vol Quiet chop, summer doldrums 4,710 +0.19% +0.52% -0.34% 0.0027 +0.19% +0.41% -0.22% 0.0486 +0.19% +0.38% -0.20% 0.0749
Non-trending + High vol Classical "whipsaw zone" for momentum 38,354 +0.71% +1.14% -0.40% <0.001 +0.71% +0.95% -0.24% 0.0004 +0.71% +0.88% -0.22% 0.0013
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 20,632 -1.07% <0.001 -0.87% <0.001 -0.99% <0.001
2020-2022 2020-01-01 → 2023-01-01 25,424 +0.37% 0.0002 +0.66% <0.001 +0.30% 0.0032
2023-2026 2023-01-01 → 2099-01-01 31,100 -0.95% <0.001 -0.81% <0.001 -0.48% <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. Bullish 20d alpha is -0.53% and worse than random — triggering on random dates would have produced better long-side returns. Either direction fails the "beats random" test. Don't use Failed 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 bullish setup: Non-trending + Low vol — alpha -0.34% / 20d on 4,710 historical triggers.
  • Best era for bullish: 2020-2022 — alpha +0.37% / 20d.

3 · When it fails — common false positives

  • Weakest bullish cell: Trending + Low vol — alpha -0.78% / 20d on 2,212 triggers.
  • Worst era for bullish: 2015-2019 — alpha -1.07% / 20d.

Signal-specific failure patterns

Worst bullish alpha in the suite
Failed double bottom bullish (price broke below support then rose back above) at α=−0.89 at 20d (p(HAC)<1e-13, p_perm=1.000). At 60d α widens to −1.72 (p<1e-10). The 'bears trapped → squeeze rally' thesis produces the opposite of what's expected — forward returns are consistently and deeply negative.
evidence: bullish 20d α=−0.89 p_perm=1.000; 60d α=−1.72
Negative across all sub-periods — no era rescues it
Sub-period bullish 20d: 2015-2019 α=−0.73, 2020-2022 α=−0.95, 2023-2026 α=−0.94. The signal has never worked. This isn't a post-COVID regime change; it's a structural failure of the pattern's forward-return thesis on US large-caps.
evidence: bullish 20d by period: −0.73, −0.95, −0.94
Why the pattern fails: failed breakdowns ≠ reversal confirmations
The pattern identifies a 'bears-trapped' setup: breakdown below support that's quickly recovered. In theory, a bullish reversal. In practice, failed breakdowns on US large-caps are typically in low-quality stocks (the reason they broke down was fundamental weakness), and the bounce back above support is a short-cover rally that fades. Real long-term reversals happen on fundamental recoveries, not on pattern completions.
evidence: 12,573 triggers consistently produce negative forward returns

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.

Sequential with completed pattern

Failed-double-bottom and double-bottom-breakdown fire on the same underlying pattern at different points: the breakdown signal fires when price breaks the neckline; failed_double_bottom fires when the pattern fails to complete and price reverses (Edwards & Magee, Technical Analysis of Stock Trends, 11th ed. 2018; Bulkowski, Encyclopedia of Chart Patterns, 3rd ed. 2021). They are sequential rather than concurrent — one signal replacing the other as the setup evolves, not two independent pieces of evidence.

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.

  • Require fundamental anchor — A failed-double-bottom WITH positive EPS revision in the last 30 days is a structurally different bet than a technical-only pattern completion. Commercial fundamentals dep.
  • Short-horizon only — If any edge exists, it's at 1-5d when the squeeze is immediate. 20d+ gives the squeeze time to fade and the underlying weakness to reassert. 1d α=−0.08% vs SPX (−0.04% vs SPXEW) — small but still negative, meaning the squeeze bounce has already faded by end of T+1 rather than continuing.
  • Use as the failure confirmation of another pattern — The signal's best use may be diagnostic: 'what does a failed bullish-reversal pattern look like' — keep it in docs for educational value rather than as an entry trigger.

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

Skip as a trade entry. Consistent negative alpha across every sub-period and every horizon. The pattern's textbook story doesn't survive the data. Useful ONLY as a documentation example of 'why not every classical pattern works on US large-caps'. Entry open T+1 if traded.