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Written by and copyright © 2005-2017 by Thomas N. Bulkowski. All rights reserved. Disclaimer: You alone are responsible for your investment decisions.
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If you have been around chart patterns long enough or are widely read in the subject, you may have heard of the 2B pattern. It is less a pattern than it is a way for swing traders to
take profits.
However, my book,
Fundamental Analysis and Position Trading  ,
pictured on the right, spends a few pages on the topic that might be useful.
If you click on this link and then buy the book (or anything) at Amazon.com, the referral will help support this site. Thanks. -- Tom Bulkowski
$ $ $
Updated 12/31/16.
Enter Trader Vic and 2B Pattern
Victor Sperandeo in his book,
Trader Vic--Methods of a Wall Street Master
describes the 2B pattern this way.
In an uptrend, if a higher high is made but fails to carry through, and then prices drop below the previous high, then the trend is apt to reverse. The converse is true for down trends.
This observation applies in any of the three trends; short-term, intermediate-term, or long-term.
A 2B on a minor high or low will usually occur within one day or less of the time
the high or low is made. For 2B's on intermediate highs or lows preceding a correction, the new high or low point will usually break within three to five days. At major market turning
points, long-term 2B's, the new high or low will usually break within seven to ten days. In the stock market, after the new high is made, the failure to carry forward usually
occurs on low to normal volume, and the confirmation of a reversal occurs on higher volume.
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I prefer to think of a 2B as one in which price begins to form a double top. It may not confirm as a double top (meaning that price may not close below the price of
the valley between the two peaks) but price exceeds the level of the first top and then reverses.
A 2B Pattern Example
Let's turn to the chart. I show Omnicom Group (OMC) in late 2016 on the daily scale. Price rises in a strong upward trend (red line A) to peak B.
The stock retraces a good portion of the move up (that is, it drops and forms the valley between peaks BC).
Price rises again and forms peak C. The horizontal blue line shows that the stock has risen above the prior peak (B) to make a new high at C.
Then the stock drops to D (so far), leaving behind another peak (C).
Peak C is a 2B pattern.
-- Thomas Bulkowski
Written by and copyright © 2005-2017 by Thomas N. Bulkowski. All rights reserved. Disclaimer: You alone are responsible for your investment decisions.
See Privacy/Disclaimer for more information.
There are two types of people: those who divide people into two types, and those who don't.
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