As of 10/18/2019
  Indus: 26,770 -255.68 -0.9%  
  Trans: 10,509 +12.56 +0.1%  
  Utils: 866 +3.67 +0.4%  
  Nasdaq: 8,090 -67.31 -0.8%  
  S&P 500: 2,986 -11.75 -0.4%  
YTD
 +14.8%  
 +14.6%  
 +21.5%  
 +21.9%  
 +19.1%  
  Targets    Overview: 10/14/2019  
  Up arrow27,600 or 26,000 by 11/01/2019
  Up arrow10,880 or 9,700 by 11/01/2019
  Up arrow900 or 845 by 11/01/2019
  Up arrow8,225 or 7,700 by 11/01/2019
  Up arrow3,050 or 2,900 by 11/01/2019
As of 10/18/2019
  Indus: 26,770 -255.68 -0.9%  
  Trans: 10,509 +12.56 +0.1%  
  Utils: 866 +3.67 +0.4%  
  Nasdaq: 8,090 -67.31 -0.8%  
  S&P 500: 2,986 -11.75 -0.4%  
YTD
 +14.8%  
 +14.6%  
 +21.5%  
 +21.9%  
 +19.1%  
  Targets    Overview: 10/14/2019  
  Up arrow27,600 or 26,000 by 11/01/2019
  Up arrow10,880 or 9,700 by 11/01/2019
  Up arrow900 or 845 by 11/01/2019
  Up arrow8,225 or 7,700 by 11/01/2019
  Up arrow3,050 or 2,900 by 11/01/2019

Bulkowski's Three Falling Peaks

 

Statistics updated: 4/10/2019.

My book, Encyclopedia of Chart Patterns Second EditionEncyclopedia of Chart Patterns 2nd Edition book. (pictured on the right), takes an in-depth look at the three falling peaks chart pattern. This formation appears often, not only in the stock market, but in other markets as well. It is a reliable performer that shines in a bear market.

If you click on the above link and then buy the book (or anything) while at Amazon.com, the referral will help support this site. Thanks.

-- Tom Bulkowski

$ $ $

The 3 falling peaks chart pattern sports three peaks, each successive one is below the prior one. When price closes below the lowest valley between the three peaks, it confirms the three falling peaks chart pattern as valid.

The first sign of a trend change from up to down begins with a lower peak, so this chart pattern can be used as an indicator of the start of a bear trend either in an individual stock or the entire market (when it occurs in an index or average). Unfortunately, waiting for the pattern to confirm before exiting a position may mean a loss or large profit give-back, so its use as a bear market indicator is not recommended. Nevertheless, if the pattern appears, it means to avoid long positions.

Important Results
Identification Guidelines
Trading Tips
Example
See Also

Important Bull Market Results for Three Falling Peaks

Overall performance rank (1 is best): 19 out of 53
Break even failure rate: 22%
Average decline: 15%
Pullback rate: 66%
Percentage meeting price target: 23%

The above numbers are based on 2,300 perfect trades. See the glossary for definitions.

Three falling peaks chart pattern

The Three Falling Peaks Chart Pattern

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Three Falling Peaks Identification Guidelines

CharacteristicDiscussion
Price trendUpward leading to the pattern then price trends downward.
ShapeThree peaks, each one lower than the prior one.
SymmetryEach peak should look similar to the others. If you select wide, thick peaks, they should all look that way. The peaks do NOT have to follow a trendline.
ConfirmationThe pattern confirms as valid when price closes below the lowest valley in the pattern.

Trading Tips for Three Falling Peaks

Trading Tactic Explanation Three falling peaks measure rule
Measure Rule
Measure rule Reference the Measure Rule figure to the right. Compute the height from highest peak (1) to lowest valley (2) then multiply it by the above 'percentage meeting price target.' Subtract the result from the lowest valley (2) in the pattern to get a price target (3). The link highlighted on the left provides more information on the measure rule.
Valley short Reference the Valley Short figure to the right. For aggressive traders: If the first valley (point A, between peaks 1 and 2) is below the second (point B between peaks 2 and 3), use the second valley (B) as the confirmation price, not the lowest valley (A).
Stop Place a stop slightly above the most recent minor high (point 3) in the three falling peaks chart pattern. If you are unfamiliar with stop placement, click the link to the left.
Cover If price rises above any of the peaks, then cover the short. Three falling peaks alternate confirmation
Valley Short
Pullbacks Pullbacks hurt performance. The link to the left provides more information about pullbacks and this link provides performance.
 
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Three Falling Peaks Example

Three falling peaks chart pattern example

The above figure shows an example of the three falling peaks chart pattern. Peaks 1, 2, and 3 mark the three peaks of the chart pattern. Point 4 is the confirmation price, the price at which squiggles on the stock chart become a three falling peaks chart pattern.

Taking the height from peak 1 (the highest high in the three falling peaks chart pattern) and valley 4 (the lowest low between the three peaks), multiplying it by 33% (the percentage meeting price target from Important Bull Market Results table) gives a target of about 76. When the stock opened after the company issued an earnings warning, price gapped lower and reached the target the same day. Basing a new target on the full height (point 1 minus point 4, subtracted from point 4) gives a target of about 69. The stock reached that target within the month.

-- Thomas Bulkowski

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See Also

 

Support this site! Clicking any of the books (below) takes you to Amazon.com. If you buy ANYTHING while there, they pay for the referral.

My novels:      New                  Bumper's Story Head's Law

Chart Patterns: After the Buy Getting Started in Chart Patterns, Second Edition Trading Basics Fundamental Analysis and Position Trading Swing and Day Trading Visual Guide to Chart Patterns Encyclopedia of Candlestick Charts Encyclopedia of Chart Patterns 2nd Edition Trading Classic Chart Patterns

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Disclaimer: You alone are responsible for your investment decisions. See Privacy/Disclaimer for more information.
Some pattern names are registered trademarks of their respective owners.

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