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Thomas Bulkowski’s successful investment activities allowed him to retire at age 36. He is an internationally known author and trader with 30+ years of stock market experience and widely regarded as a leading expert on chart patterns. He may be reached at

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Bulkowski's 8 New Price Lines

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My book, Encyclopedia of Candlestick ChartsEncyclopedia of Candlestick Charts book., pictured on the left, takes an in-depth look at candlesticks, including performance statistics.

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The 8 new price lines candle pattern is as it sounds: eight candle lines in a row, each with a high higher than the previous one. It is supposed to act as a bearish reversal, but testing reveals that it acts as a bullish continuation pattern 53% of the time. What I find interesting is that it appears so often. It ranks 52 out of 103 candlestick types, where 1 is most often. Yes, that is mid list, but it could be much further down the list.

Overall performance ranks 90th which is terrible. Even though the pattern acts as a continuation of the up trend, do not expect the trend to last long.

8-New Price Lines Important Results

Theoretical performance: Bearish reversal
Tested performance: Bullish continuation 53% of the time
Frequency rank: 52
Overall performance rank: 90
Best percentage meeting price target: 92% (bull market, down breakout)
Best average move in 10 days: -3.41% (bear market, down breakout)
Best 10-day performance rank: 62 (bear market, down breakout)

All ranks are out of 103 candlestick patterns with the top performer ranking 1. "Best" means the highest rated of the four combinations of bull/bear market, up/down breakouts.

The above numbers are based on hundreds of perfect trades. See the glossary for definitions.

The ideal 8 new price lines candlestick
8 New Price Lines

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8-New Price Lines Discussion

As I mentioned in the introduction, candle theory says the 8 new price lines should act as a reversal of the up trend, but testing found it doesn't. Price continues rising 53% of the time. That result is what I call "near random." The frequency rank is 52, meaning you should be able to find plenty of examples of this candle pattern, but not as many as ants at a picnic. The overall performance rank is 90, which is terrible. It suggests that the uptrend dies soon after this pattern breaks out.

With the new lines candles, 8, 10, 12 and 13, I determine the breakout direction using the last candle line in the pattern. A close above the top or a close below the bottom of it would constitute an up or down breakout, respectively. The measure rule (percentage meeting price target) is based on taking the height of the move from the first to last candle in the pattern and dividing by 6 for upward breakouts or 3 for downward breakouts. The reason for this is because the pattern can be quite tall and using the full height would set an almost impossible target.

Price meets the target after a downward breakout in a bull market 92% of the time. Once price begins falling, it can really tumble. However, the best average move 10 days after a breakout is a drop of 3.41% in a bear market. A good move would be a drop of 6% or more, so this falls short. The ranking of the decline is 62, well behind the first place rank of 1.

8-New Price Lines Identification Guidelines

CharacteristicDiscussion
Number of candle linesEight.
Price trend leading to the patternNone required.
ConfigurationLook for eight consecutive candle lines, each with a higher high.

8-New Price Lines Three Trading Tidbits

If you want a few bones from my Encyclopedia of candlestick charts book, here are three to chew on. The pages refer to the book where the tips appear.

  1. 8 new price lines candles that appear within a third of the yearly low perform best -- page 30.
  2. 8 new price lines acting as reversals occur most often within a third of the yearly low. Continuations are more likely near the yearly high -- page 33.
  3. Watch for a 38% to 62% retracement of the prior up move -- page 32.
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8-New Price Lines Example

The 8 new price lines candlestick on the daily scale

The chart shows the 8 new price lines candlestick pattern on the daily scale, points 1 through 8. Since price continues higher, it also shows 10, 12 and 13 new price lines candlesticks. Notice how none of them act as reversal patterns either. Price just keeps moving up until day 15. After that, price drops, but only for a few days before the uptrend continues.

Based on this chart, and many others like it, to say that price will reverse after 8 days of higher highs is just guessing. If that were the case, then there would be no 10 new price lines nor 12 or 13 new price lines candle patterns.

-- Thomas Bulkowski

 

 

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8-New Price Lines Other Examples

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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. See Privacy/Disclaimer for more information. I need someone real bad. Are you real bad?