As of 09/18/2020
  Indus: 27,657 -244.56 -0.9%  
  Trans: 11,432 -120.44 -1.0%  
  Utils: 798 -12.86 -1.6%  
  Nasdaq: 10,793 -117.00 -1.1%  
  S&P 500: 3,319 -37.54 -1.1%  
YTD
-3.1%  
 +4.9%  
-9.2%  
 +20.3%  
 +2.7%  
  Targets    Overview: 09/14/2020  
  Up arrow29,400 or 26,700 by 10/01/2020
  Up arrow11,750 or 10,600 by 10/01/2020
  Up arrow845 or 775 by 10/01/2020
  Up arrow11,800 or 10,400 by 10/01/2020
  Up arrow3,600 or 3,200 by 10/01/2020
CPI (updated daily): Arrows on 8/18/20
As of 09/18/2020
  Indus: 27,657 -244.56 -0.9%  
  Trans: 11,432 -120.44 -1.0%  
  Utils: 798 -12.86 -1.6%  
  Nasdaq: 10,793 -117.00 -1.1%  
  S&P 500: 3,319 -37.54 -1.1%  
YTD
-3.1%  
 +4.9%  
-9.2%  
 +20.3%  
 +2.7%  
  Targets    Overview: 09/14/2020  
  Up arrow29,400 or 26,700 by 10/01/2020
  Up arrow11,750 or 10,600 by 10/01/2020
  Up arrow845 or 775 by 10/01/2020
  Up arrow11,800 or 10,400 by 10/01/2020
  Up arrow3,600 or 3,200 by 10/01/2020
CPI (updated daily): Arrows on 8/18/20

Bulkowski on the Bearish Bat®

 

Initial release: 6/27/2018. Statistics updated 8/28/2020.

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 idea behind this pattern is that once point D is located, price should turn lower there. It does, too, 86% of the time!

The bat pattern
Bearish Bat

 

Important Bull Market Results

Overall performance rank for down moves: 1 (best) out of 5 (versus other Fibonacci patterns)
Break even failure rate: 18%
Average decline: 14%
Percentage reversing at D: 86%

The above numbers are based on more than 500 perfect trades. See the glossary for definitions.

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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 537 of them.

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.

Price may dip after point D, in fact it's likely that it does so (86% do), but the drop usually doesn't amount to much (14% average). Eighteen percent of chart patterns see price decline no more than 5% below D.

For targets, after peaking at D, price drops to A 35% of the time, to B 81% of the time, and to C 48% of the time.

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.

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.

My novels:  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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