Thomas N. Bulkowski - Encyclopedia of Chart Patterns

74 Chapter 74Table 74.1 Identification Guidelines Table 74.2 General StatisticsTable 74.3 Cumulative Failure RatesTable 74.4 Breakout and Post‐Breakout StatisticsTable 74.5 Size StatisticsTable 74.6 Volume StatisticsTable 74.8 Performance and Failures Over Time for Bull MarketsTable 74.9 Busted PatternsTable 74.10 Trading Tactics

75 Chapter 75Table 75.1 Identification GuidelinesTable 75.2 General StatisticsTable 75.3 Volume Statistics (Failure Rate)Table 75.4 Performance and Failures Over Time for Bull MarketsTable 75.5 Trading Tactics

76 Chapter 76Table 76.1 Identification GuidelinesTable 76.2 General StatisticsTable 76.3 Volume Statistics (Failure Rate)Table 76.4 Performance and Failures Over Time for Bull MarketsTable 76.5 Trading Tactics

77 GlossaryTable x.2 General StatisticsTable x.3 Cumulative Failure RatesTable x.4 Breakout and Post‐Breakout StatisticsTable x.5 Size StatisticsTable x.6 Volume StatisticsTable x.7 How Often Stops HitTable x.8 Performance and Failures Over Time for Bull Markets (Bear markets o...Table x.9 Busted PatternsTable x.10 Trading TacticsTable G1 Volatility Stop Calculation

1 Introduction Figure I.1 A double bottom signals a trade entry at D and an exit at the ult...

2 Chapter 1 Figure 1.1 The pattern at A and B leads to a strong move higher. Figure 1.2 A diving board on the weekly scale leads to the stock climbing st... Figure 1.3 This diving board fails to act as expected. Figure 1.4 This diving board is on the daily chart. Figure 1.5 This U‐shaped pattern delivers a failure. Figure 1.6 A pothole setup happens after a drop and flat base. Figure 1.7 Here is a swing trade using a double bottom and a double top. Figure 1.8 Shown are three ways to trade a pullback. Figure 1.9 Here are two setups that work well for swing trading throwbacks....

3 Chapter 2 Figure 2.1 A bearish AB=CD pattern correctly predicts a downward move in the... Figure 2.2 This bearish AB=CD pattern breaks out upward. Figure 2.3 Price is supposed to turn down at F, but the search for point D e... Figure 2.4 Jacob used the bearish AB=CD pattern to exit a trade.

4 Chapter 3 Figure 3.1 This chart shows how a bullish AB=CD pattern sees price turn at D... Figure 3.2 Another example of a bullish AB=CD pattern with an upward breakou... Figure 3.3 This bullish AB=CD has price falling through the predicted turnin... Figure 3.4 George took a loss buying this AB=CD.

5 Chapter 4 Figure 4.1 The five turns, X, A, B, C, and D, complete the bearish bat. Figure 4.2 This bearish bat sees price dip after D but still breaks out upwa... Figure 4.3 This bearish bat isn't bearish at all. Figure 4.4 Pete bought near the high and made a quick swing trade after D.

6 Chapter 5 Figure 5.1 This bullish bat breaks out upward (at F) and makes a strong push... Figure 5.2 This bullish bat rises after point D, but breaks out downward at ... Figure 5.3 This bullish bat isn't bullish at all. Price fails to turn higher... Figure 5.4 This is a sample trade using a bullish bat.

7 Chapter 6 Figure 6.1 This big M sees price rise up to peak B and drop from peak C, bot... Figure 6.2 This big M (BD) struggles to find a bottom between the two peaks ... Figure 6.3 Price fails to drop more than 5% after the downward breakout. Figure 6.4 Justin shorted this big M and lost money on the trade.

8 Chapter 7 Figure 7.1 This big W sees price rise, but not very far. Figure 7.2 Price at F almost returns to the launch price, A. Figure 7.3 Price busts the upward breakout from this big W. Figure 7.4 John decided not to trade this big W because of overhead resistan...

9 Chapter 8 Figure 8.1 A broadening bottom, specifically a five‐point reversal, so‐calle... Figure 8.2 Don't accept patterns with too much whitespace. This happens when... Figure 8.3 Where's the breakout? Figure 8.4 This broadening bottom breaks out downward, reverses, and busts t... Figure 8.5 A broadening bottom with five alternating touches. Expect an imme...

10 Chapter 9 Figure 9.1 Two right‐angled ascending broadening formations bounded by a hor... Figure 9.2 Price pulls back to the base of the formation. Pullbacks occur of... Figure 9.3 Support and resistance areas on a weekly time scale. They appear ... Figure 9.4 The broadening formation breaks out downward, but the stock fails... Figure 9.5 Shown are price targets using half and full formation heights for...

11 Chapter 10 Figure 10.1 A horizontal trendline drawn along the tops, and a down‐sloping ... Figure 10.2 Another descending broadening formation, but this one has an upw... Figure 10.3 The left descending broadening pattern shows a trendline rebound... Figure 10.4 AB is not a descending broadening formation. Figure 10.5 A descending broadening formation appears with price that fails ... Figure 10.6 This descending broadening pattern (left) results in a 5% failur... Figure 10.7 This descending broadening pattern has an upward breakout. To co...

12 Chapter 11 Figure 11.1 A potential triple top changed into a broadening formation. The ... Figure 11.2 The broadening top has higher highs and lower lows as the price ... Figure 11.3 A weak example of a five‐point reversal or orthodox broadening t... Figure 11.4 Price in this broadening top moved horizontally for 6 months bef... Figure 11.5 Use the measure rule to compute the target price. First, compute...

13 Chapter 12 Figure 12.1 An ascending broadening wedge has two up‐sloping trendlines that... Figure 12.2 The broadening feature of the wedge is clear in this chart. The ...Figure 12.3 A broadening formation fails to continue moving down, requiring ...Figure 12.4 An ascending broadening wedge that fails to continue moving down...Figure 12.5 This ascending broadening wedge trade led to an 87% gain.Figure 12.6 The measure rule as it applies to two ascending broadening wedge...

14 Chapter 13Figure 13.1 This descending broadening wedge acts as a consolidation of the ...Figure 13.2 This descending broadening wedge acts as a reversal of the inter...Figure 13.3 This descending broadening wedge is a consolidation pattern in a...Figure 13.4 This wedge is a failure according to the 5% rule. Price fails to...Figure 13.5 As described in the Sample Trade, Mary used the wedge's height p...

15 Chapter 14Figure 14.1 Upward momentum propels price higher during late 1993, then stal...Figure 14.2 Shown are various components of a bump‐and‐run reversal bottom. ...Figure 14.3 The bump height is less than twice the lead‐in height, a clue th...Figure 14.4 Consider waiting to buy the stock until after it breaks out upwa...Figure 14.5 This is a bump‐and‐run reversal that stopped rising within 15% o...Figure 14.6 This BARR bottom trade didn't work as expected.Figure 14.7 A bump‐and‐run reversal bottom failure in which John invested. H...Figure 14.8 A bump‐and‐run reversal bottom on a weekly scale. After the brea...

16 Chapter 15Figure 15.1 Price moved higher along the trendline in the lead‐in phase, jum...Figure 15.2 A bump‐and‐run reversal shown on a weekly chart. The potential B...Figure 15.3 A bump‐and‐run reversal with a rounded bump occurs 76% of the ti...Figure 15.4 Shown is a bump‐and‐run reversal with a pointed‐looking first bu...Figure 15.5 Shown is a bump‐and‐run reversal trendline and parallel warning ...Figure 15.6 As described in the Sample Trade, Jenny raised her sell price as...

17 Chapter 16Figure 16.1 This bearish butterfly is really bullish. Price continues the up...Figure 16.2 This bearish butterfly sees price drop from D and stall just bel...Figure 16.3 Price turned down at D but doesn't drop far when price continues... Figure 16.4 Susan decided to trade this bearish butterfly.

18 Chapter 17Figure 17.1 This bullish butterfly leads to a fast recovery.Figure 17.2 This bullish butterfly is at XABCD and has a downward breakout, ...Figure 17.3 This bullish butterfly fails to see price turn higher after D.Figure 17.4 Mary traded this bullish butterfly for a quick 12% profit.