As of 07/19/2019
  Industrials: 27,154 -68.77 -0.3%  
  Transports: 10,604 +66.69 +0.6%  
  Utilities: 820 -11.25 -1.4%  
  Nasdaq: 8,146 -60.75 -0.7%  
  S&P 500: 2,977 -18.50 -0.6%  
YTD
 +16.4%  
 +15.6%  
 +15.0%  
 +22.8%  
 +18.7%  
  Tom's Targets    Overview: 07/12/2019  
  Down arrow26,500 or 28,000 by 08/01/2019
  Down arrow10,000 or 11,000 by 08/01/2019
  Up arrow850 or 800 by 08/01/2019
  Down arrow7,950 or 8,500 by 08/01/2019
  Down arrow2,900 or 3,075 by 08/01/2019
As of 07/19/2019
  Industrials: 27,154 -68.77 -0.3%  
  Transports: 10,604 +66.69 +0.6%  
  Utilities: 820 -11.25 -1.4%  
  Nasdaq: 8,146 -60.75 -0.7%  
  S&P 500: 2,977 -18.50 -0.6%  
YTD
 +16.4%  
 +15.6%  
 +15.0%  
 +22.8%  
 +18.7%  
  Tom's Targets    Overview: 07/12/2019  
  Down arrow26,500 or 28,000 by 08/01/2019
  Down arrow10,000 or 11,000 by 08/01/2019
  Up arrow850 or 800 by 08/01/2019
  Down arrow7,950 or 8,500 by 08/01/2019
  Down arrow2,900 or 3,075 by 08/01/2019

Bearish Bat®

 

Initial release: 6/27/2018

Overview

This article describes my analysis of the bearish bat pattern as described by publicly available information and common sense rules to determine valid patterns. Additional rules may or may not improve performance. I tested the pattern using only the below identification guidelines.

The bearish bat often resembles a big W chart pattern except that the turns are located using Fibonacci ratios. It's a rare pattern, so don't expect to find it in your attic anytime soon. With so many complicated turns, you'll need better than 20/20 vision and a flashlight to find them, too.

The breakout direction is upward 72% of the time, so that suggests the pattern isn't bearish at all. However, that measure is misleading.

Because the pattern ends near the pattern's high, it's easy for price to close above the top of the pattern (compared to closing below the bottom of it). So expect an upward breakout.

Using another measure, I found that price peaks 69% at point D (the end of the pattern). Price drops from there, but not much. The average decline is 13% with 21% of patterns failing to drop more than 5% below point D. These numbers are different from the ones shown in Important Results. 'Important Results' measures the drop below the bottom of the pattern, not below point D.

The bat pattern
Bearish Bat

 

Important Bull Market Results

Overall performance rank (1 is best): Not ranked
Break even failure rate: 31%
Average decline: 13%
Pullback rate: 66%
Percentage meeting price target: *33%

The above numbers are based on 139 perfect trades with downward breakouts. See the glossary for definitions.

* I used the height of the pattern to determine a target after a downward breakout.

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Identification Guidelines

 Characteristic Discussion bat retraces
Bearish Bat Ratios
Peaks/ValleysThe peaks and valleys in the pattern need not be consecutive. This is not a guideline, but an observation.
XABPrice climbs to peak at X, the first point in the pattern. It drops from there to valley A and rises to peak B. The BA/XA retrace should be either 38.2% or 50%.
ABCTurn ABC shows a BC/BA retrace of one of the following Fibonacci ratios: 38.2%, 50%, 61.8%, 70.7%, 78.6% or 88.6%.
BCDExtension DC/BC is one of the following Fibonacci ratios: 161.8%, 200%, 224% or 261.8%.
DAXRetrace DA/XA is 88.6%.

Because of the many ratios used, especially the 88.6% DA/XA retrace, the pattern is rare. I found 631 of them, but just 139 had downward breakouts.

You'll need a computer with software to find the pattern.

Find five peaks/valleys where the ratio of one leg to another is one of the Fibonacci numbers listed in the above table. However, I used a 3 percentage point window on the last ratio (88.6% becomes 85.6% to 91.6%) to keep the sample count high.

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Trading Tips

I don't offer much trading help because I'm new to this pattern.

My tests show that the pattern breaks out upward 72% of the time. What does that mean? A close above the top of the pattern (above peak X) means an upward breakout.

Price may dip after point D, in fact it's likely that it does so (69% do), but the drop usually doesn't amount to much (10% median, 13% average). Twenty-one percent of chart patterns see price decline less than 5% below D.

You may have better luck with the pattern if overhead resistance matches or is near the XD peaks. Think of this as a ceiling which takes some pushing to break through.

I did not test or examine the pattern for this behavior. However, the following chart shows an example of this type of overhead resistance and a bat pattern.

Example

An example bat pattern

The figure on the right shows an example of a bearish bat pattern that isn't bearish at all. As I mentioned, most bats breakout upward, at least the ones I tested. Your tests may vary.

Here are the high/low prices of the various turns

X: 67.46
A: 59.36
B: 62.49
C: 59.55
D: 66.36

Here are the ratios.

BA/XA = (62.49-59.36)/(67.46-59.36) or 38.6%
BC/BA = (62.49-59.55)/(62.49-59.36) or 93.9%. However the high-low range of C (60.21 to 59.55) encompasses the 88.6% retrace, so I allow this.
DC/BC = (66.36-59.55)/(62.49-59.55) or 231.6%. However, the high-low range of D (66.36 to 65.80) encompasses the 224% retrace, so it's allowed.
DA/XA = (66.36-59.36)/(67.46-59.36) or 86.4% which is within three percentage points of 88.6%, so it's allowed.

The day after D, the stock dropped to a low of 65.10 before resuming its upward move. As of 4/10/19, the stock peaked at E, dropped to about 67, and wobbled up to 76.

I drew two horizontal red lines showing what I believe is an area of overhead resistance (between the lines). I would expect the stock to peak somewhere within that area. (It did. Price dropped to 67 later in June 2018).

Indeed, the peaks at X and to the left of it stop at or near the bottom red line. The stock has bumped up against overhead resistance of the top line at E and dropped along with the general market on the last day shown.

On the weekly chart, the stock is close to making new all-time highs, so there is no additional overhead resistance once it clears the January spike (the highest price on the chart).

-- 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.
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 Bumper's Story Head's Law
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