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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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Busted
Patterns
Candles Chart
Patterns
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Patterns
Small Patterns
Market
Industrials (^DJI):
Transports (^DJT):
Utilities (^DJU):
Nasdaq (^IXIC):
S&P500 (^GSPC):
As of 12/11/2017
24,386 56.87 0.2%
10,371 -31.68 -0.3%
763 4.90 0.6%
6,875 35.00 0.5%
2,660 8.49 0.3%
YTD
23.4%
14.7%
15.6%
27.7%
18.8%
Tom's Targets    Overview: 11/30/2017
24,600 or 23,500 by 12/15/2017
9,900 or 10,500 by 12/15/2017
800 or 750 by 12/15/2017
7,100 or 6,700 by 12/15/2017
2,725 or 2,575 by 12/15/2017

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.

November 2017 Headlines


Archives


Tuesday 12/12/17. Forecast: Version 2.0

Picture of the Dow industrials forecast.

Jeff Connell wrote an email back in November suggesting that because the 2008 (late 2007 to early 2009) bear market was so unusual, that it should be removed from the forecast. Why? Because it won't likely happen again (or so we hope).

The above chart shows the daily forecast without the 2007-2009 data. And by that, I mean the entire three year period was removed (mostly for technical reasons). I checked the software's prediction with a spreadsheet of Dow data to make sure the averaging of the prior decades was correct. I believe it is.

The chart is supposed to start at the same price, but as you can see, it doesn't. That's because January 2 this year falls on a Monday, but some years January 2 falls on a weekend (when no trading occurs). So I had to make an adjustment for those situations that had missing data before I took the average. Don't get bogged down by this explanation. It's not important to this discussion.

Picture of the Dow industrials forecast.

Notice that peak A of the prediction is almost as high as B in the Dow. Yes, A comes months before B. Also notice that peak C has almost the same timing as A, but A is much higher.

The significant drop to D hasn't happened yet, and my guess is it won't happen.

I drew a thin green line to show where the prediction finishes the year. It's about 22,100.

The Decade View

This (the chart on the right) is the adjusted forecast for the next 10 years, shown on the monthly scale. I also removed the 2008 bear market in the same way as described above.

2018 has another predicted dip and the early 20s aren't smooth (re 2021-2022), but the Dow is predicted to climb to almost 46,000. So you can buy something now and double your money in 10 years.

-- Thomas Bulkowski

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Monday 12/11/17. Market Monday: The Week Ahead

My Prediction

Picture of the Dow utilities on the daily scale.

I show a picture of the Dow utilities on the daily scale.

Although the two peaks of the chart pattern at AB are uneven, I call this a double top. The two tops are near enough in price that it qualifies in my opinion.

I don't think it's a stellar example of a double top, but it'll pass as one.

The pattern becomes a valid double top when the index closes below the red line drawn at C. In other words, I've found that waiting for a stock or index to confirm a pattern, you have a much better chance of it behaving as you would hope, than if it's not confirmed.

Indeed, one study I did concluded that 63% of potential double tops will fail to confirm in a bull market. That's huge.

Wait for confirmation before trading a chart pattern.

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A Brief Look Back

Picture of a flower from my garden.

The following is a brief review of how the markets performed over time. The numbers refer to the close-to-close move in the Dow industrials.

Monday: Up 58.46 points.
Tuesday: Down 109.41 points.
Wednesday: Down 39.73 points.
Thursday: Up 70.57 points.
Friday: Up 117.68 points.

For the Week...

The Dow industrials were up 97.57 points or 0.4%.
The Nasdaq composite was down 7.51 points or 0.1%.
The S&P 500 index was up 9.28 points or 0.4%.

Year to Date...

Dow Industrials
     0.8% down from the high of 24,534.04 on 12/04/2017.
     23.6% up from the low of 19,677.94 on 01/19/2017.
Nasdaq
     1.1% down from the high of 6,914.19 on 11/28/2017.
     26.7% up from the low of 5,397.99 on 01/03/2017.
S&P 500
     0.5% down from the high of 2,665.19 on 12/04/2017.
     18.1% up from the low of 2,245.13 on 01/03/2017.

Options Expiration

Many options expire this week, so traders will be looking to close out their positions, and that suggests increased volatility (large daily price swings).

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Swing and Position Traders: Chart Pattern Indicator

The chart pattern indicator is bullish with 1 of 3 half triangles showing (). Additional triangles are a measure of strength with solid triangles meaning a more reliable signal than half triangles.

Swing Traders: Pivot Points

The following is based on an SFO article in December 2004 by John Seekinger, titled, "Take a two-dimensional approach." He offers these tips.

IndexS2S1PivotR1R2
Dow Industrials (^DJI): Daily  24,190  24,260  24,295  24,364  24,400 
Weekly  23,889  24,109  24,321  24,542  24,754 
Monthly  22,744  23,537  24,035  24,828  25,327 
S&P500 (^GSPC): Daily  2,642  2,647  2,649  2,654  2,657 
Weekly  2,607  2,629  2,647  2,670  2,688 
Monthly  2,517  2,584  2,625  2,692  2,732 
Nasdaq (^IXIC): Daily  6,809  6,824  6,847  6,863  6,886 
Weekly  6,659  6,750  6,824  6,915  6,990 
Monthly  6,560  6,700  6,807  6,947  7,054 
  • Seekinger doesn't look at the range of S2 to R2 as support and resistance levels. Rather, he considers them oversold (S) and overbought (R) areas.
  • S2 to R2 range of values across daily, weekly, and monthly periods: If two values are close together then they lend more significance to the area.
  • If the market trends on day 1, the odds rise tremendously that the market will be range bound between daily S1 and daily R1 the next day.
  • In a quiet market when traders are waiting for an important earnings announcement or economic report, look for daily R1 and S1 levels to hold and for the market to return to the daily pivot.
  • A move outside of daily R1 or S1 usually does not mean a breakout.
  • The odds suggest that the entire week's price action will remain between weekly R2 and S2.
  • Avoid going long when the market moves above weekly R2 (it's overbought) and avoid going short when price moves below weekly S2 (oversold).
  • Consider going short at weekly R1 or long at weekly S1 with a profit objective of the weekly pivot.
  • Consider going long at weekly S2 or short at weekly R2 with a profit objective of weekly S1 or R1, respectively.

Here are the formulas:

Pivot point: P = (H + L + C)/3
First resistance level: R1 = (2 * P) - L
First support level: S1 = (2 * P) - H)
Second resistance level: R2 = P + (R1 - S1)
Second support level: S2 = P - (R1 - S1)
H = high price , L=low price, C=closing price

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Consecutive Price Trends

Index Consecutive
Closes So Far 
% Comments 
 Dow industrials (^DJI) 3 weeks up 23.6%   Expect a reversal soon. 
 9 months up 0.0%   Expect a reversal soon. 
 S & P 500 (^GSPC) 3 weeks up 23.1%   Expect a reversal soon. 
 9 months up 0.0%   Expect a reversal soon. 
 Nasdaq composite (^IXIC) 2 weeks down 16.6%   Expect a reversal soon. 
 1 month down 25.6%   The trend may continue. 

How long can an index close higher (or lower) each day? The adjacent table shows how often consecutive up or down closes occur in the indices, based on the most recent trend of closes.

Low percentages suggest the market is overdue to turn (think of it as the likelihood that next week or next month will continue the trend, based on historical performance). Values of 50% mean random, so most percentages will be lower.

The analysis uses data going back 10 years for weekly percentages and 25 years for monthly percentages (or the start of data, whichever is more recent). Any unchanged closing price is interpreted as the end of the string of consecutive up or down closes.

Earnings, Chart Patterns & Industries

Earnings season is over.

Mutual funds will begin dividend distributions and rebalancing their portfolios for the approaching year end (starts in late November).

 Found Chart Pattern Name
10Pipe bottom
10Double Top, Adam and Adam
8Double Bottom, Adam and Adam
8Triangle, symmetrical
7Broadening top
7Triangle, ascending
7Head-and-shoulders top
7Head-and-shoulders bottom
5Dead-cat bounce
4Pipe top

Large numbers of bullish or bearish chart patterns can signal short- to intermediate-term market trends (many bullish chart patterns can mean an uptrend will continue, for example). However, please realize that the short-term price trend could have changed since the pattern was discovered (this is especially true of pipe tops or bottoms, which are weekly patterns).

The 10 types of most frequently appearing chart patterns in the stocks, indices, and long-only exchange traded funds I follow during the last month are shown in the adjacent table.

 

 

 

 

The industries I follow were the best (rank 1) and worst performing.

This WeekLast Week
1. Trucking/Transp. Leasing1. Trucking/Transp. Leasing
2. Human Resources2. Homebuilding
3. Homebuilding3. Human Resources
4. Apparel4. Securities Brokerage
5. Securities Brokerage5. Retail Building Supply
50. Furn/Home Furnishings50. Chemical (Specialty)
51. Electric Utility (West)51. Food Processing
52. Food Processing52. Biotechnology
53. Advertising53. Cement and Aggregates
54. Household Products54. Household Products
55. Chemical (Specialty)55. Drug
56. Drug56. Advertising
57. Short ETFs57. Short ETFs

-- Thomas Bulkowski

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Friday 12/8/17. Pattern Trading Setups for the Weekend.

Go to Table.

You can find setups based on a Fibonacci retrace by clicking on the link.

Click the link for a list of symbols from the table.

The following patterns were found manually, so the results may differ from those found using Patternz.

There were 10 patterns found this week (excluding pipe bottoms; pipe tops and bottoms are found looking back 2 weeks) out of 593 stocks searched, or 1.7%. Based on the percentage, the stock market is trending since few consolidation patterns appear.

Excluding ETFs, there were 3 bullish chart patterns this week and 5 bearish ones with any remaining (0) being undecided. The ratio of bullish to bearish patterns suggests the market is hinting of a coming bearish (down) turn.

In the table below, the red and green colors are based on the historical breakout direction for the associated chart pattern. If a high and tight flag appears, the start and end dates highlight the flagpole only and not the flag.

More...

-- Thomas Bulkowski

 

Symbol Chart Pattern Bullish
Bearish
Start End Industry
ACIWBroadening bottom      11/08/201712/01/2017IT Services
ASNADead-cat bounce      12/05/201712/05/2017Apparel
EEBroadening top      11/16/201712/07/2017Electric Utility (West)
FCXHead-and-shoulders bottom      10/31/201712/05/2017Metals and Mining (Div.)
IDABroadening top      11/17/201712/05/2017Electric Utility (West)
MCHXPipe top      11/20/201711/27/2017Advertising
PANWPipe top      11/20/201711/27/2017Computer Software and Svcs
WMTTriangle, symmetrical      11/17/201712/07/2017Retail Store
IDUDouble Top, Adam and Adam      11/15/201712/01/2017Electric Utility (Central)
XLUDouble Top, Adam and Adam      11/15/201712/01/2017Electric Utility (Central)

 

Weekly screen for chart patterns ending between 11/30/2017 and 12/07/2017. Many may be still in development. If no securities appear, then I have not identified any new patterns.

Definitions
RS is relative strength (where 1 is best). For other definitions, see the glossary.
’Breakout is upward/downward 100% of the time’ means price breaks out up/down by definition, not by statistically measuring the rate.
All numbers assume a bull market and are based on the breakout direction that occurs most often.
For more information, consult my book, Encyclopedia of Chart Patterns, Second Edition.
 
ACI Worldwide (ACIW)
Industry: IT Services
Industry RS rank: 21 out of 56
Stock RS rank: 446 out of 585
12/7/17 close: $22.48
1 Month avg volatility: $0.54. Volatility stop (for upward breakout): $21.23 or 5.6% below the close.
Change YTD: 23.86%
Volume: 559,200 shares. 3 month avg: 423,451 shares.
Since 2009 bear market, the best buy day (fewest up closes) is Monday, and best sell day (most up closes) is Tuesday.
 
Chart pattern: Broadening bottom reversal pattern from 11/08/2017 to 12/01/2017
Breakout is upward 53% of the time.
Average rise: 27%.
Break-even failure rate: 10%.
Throwbacks occur 41% of the time.
Price hits measure rule target 59% of the time.

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Ascena Retail Group (ASNA)
Industry: Apparel
Industry RS rank: 5 out of 56
Stock RS rank: 316 out of 585
12/7/17 close: $1.99
1 Month avg volatility: $0.14. Volatility stop (for downward breakout): $2.41 or 21.1% above the close.
Change YTD: -67.85%
Volume: 2,965,100 shares. 3 month avg: 2,765,565 shares.
Since 2009 bear market, the best buy day (fewest up closes) is Wednesday, and best sell day (most up closes) is Tuesday.
 
Chart pattern: Dead-cat bounce continuation pattern from 12/05/2017 to 12/05/2017
Breakout is downward 67% of the time.
Average decline: 18%.

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El Paso Electric (EE)
Industry: Electric Utility (West)
Industry RS rank: 49 out of 56
Stock RS rank: 307 out of 585
12/7/17 close: $58.80
1 Month avg volatility: $0.94. Volatility stop (for downward breakout): $61.49 or 4.6% above the close.
Change YTD: 26.45%
Volume: 220,400 shares. 3 month avg: 240,006 shares.
Since 2009 bear market, the best buy day (fewest up closes) is Wednesday, and best sell day (most up closes) is Thursday.
 
Chart pattern: Broadening top reversal pattern from 11/16/2017 to 12/07/2017
Breakout is downward 50% of the time.
Average decline: 15%.
Break-even failure rate: 18%.
Pullbacks occur 48% of the time.
Price hits measure rule target 37% of the time.

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Freeport-McMoRan Copper and Gold B (FCX)
Industry: Metals and Mining (Div.)
Industry RS rank: 31 out of 56
Stock RS rank: 82 out of 585
12/7/17 close: $14.84
1 Month avg volatility: $0.39. Volatility stop (for upward breakout): $13.42 or 9.6% below the close.
Change YTD: 12.51%
Volume: 20,548,800 shares. 3 month avg: 16,663,048 shares.
Since 2009 bear market, the best buy day (fewest up closes) is Thursday, and best sell day (most up closes) is Friday.
 
Chart pattern: Head-and-shoulders bottom reversal pattern from 10/31/2017 to 12/05/2017
Breakout is upward 100% of the time.
Average rise: 38%.
Break-even failure rate: 3%.
Throwbacks occur 45% of the time.
Price hits measure rule target 74% of the time.

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IDACORP Inc (IDA)
Industry: Electric Utility (West)
Industry RS rank: 49 out of 56
Stock RS rank: 295 out of 585
12/7/17 close: $97.23
1 Month avg volatility: $1.32. Volatility stop (for downward breakout): $100.01 or 2.9% above the close.
Change YTD: 20.71%
Volume: 271,300 shares. 3 month avg: 195,620 shares.
Since 2009 bear market, the best buy day (fewest up closes) is Wednesday, and best sell day (most up closes) is Thursday.
 
Chart pattern: Broadening top reversal pattern from 11/17/2017 to 12/05/2017
Breakout is downward 50% of the time.
Average decline: 15%.
Break-even failure rate: 18%.
Pullbacks occur 48% of the time.
Price hits measure rule target 37% of the time.

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Marchex, Inc (MCHX)
Industry: Advertising
Industry RS rank: 51 out of 56
Stock RS rank: 318 out of 585
12/7/17 close: $3.13
1 Month avg volatility: $0.13. Volatility stop (for downward breakout): $3.38 or 8.1% above the close.
Change YTD: 18.11%
Volume: 198,300 shares. 3 month avg: 88,900 shares.
This security may be thinly traded (less than 100k shares)!
Since 2009 bear market, the best buy day (fewest up closes) is Tuesday, and best sell day (most up closes) is Wednesday.
 
Chart pattern: Pipe top reversal pattern from 11/20/2017 to 11/27/2017
Breakout is downward 100% of the time.
Average decline: 20%.
Break-even failure rate: 11%.
Pullbacks occur 41% of the time.
Price hits measure rule target 70% of the time.

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Palto Alto Networks Inc (PANW)
Industry: Computer Software and Svcs
Industry RS rank: 20 out of 56
Stock RS rank: 401 out of 585
12/7/17 close: $142.83
1 Month avg volatility: $3.61. Volatility stop (for downward breakout): $152.59 or 6.8% above the close.
Change YTD: 14.22%
Volume: 1,508,500 shares. 3 month avg: 1,559,428 shares.
Since 2009 bear market, the best buy day (fewest up closes) is Wednesday, and best sell day (most up closes) is Wednesday.
 
Chart pattern: Pipe top reversal pattern from 11/20/2017 to 11/27/2017
Breakout is downward 100% of the time.
Average decline: 20%.
Break-even failure rate: 11%.
Pullbacks occur 41% of the time.
Price hits measure rule target 70% of the time.

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Wal-Mart Stores Inc. (WMT)
Industry: Retail Store
Industry RS rank: 26 out of 56
Stock RS rank: 109 out of 585
12/7/17 close: $96.78
1 Month avg volatility: $1.49. Volatility stop (for upward breakout): $93.67 or 3.2% below the close.
Change YTD: 40.02%
Volume: 7,455,700 shares. 3 month avg: 9,192,278 shares.
Since 2009 bear market, the best buy day (fewest up closes) is Friday, and best sell day (most up closes) is Tuesday.
 
Chart pattern: Triangle, symmetrical continuation pattern from 11/17/2017 to 12/07/2017
Breakout is upward 54% of the time.
Average rise: 31%.
Break-even failure rate: 9%.
Throwbacks occur 37% of the time.
Price hits measure rule target 66% of the time.

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DJ US Utilities sector index fund (IDU)
Industry: Electric Utility (Central)
Industry RS rank: 42 out of 56
Stock RS rank: 383 out of 585
12/7/17 close: $139.37
1 Month avg volatility: $1.11. Volatility stop (for downward breakout): $141.99 or 1.9% above the close.
Change YTD: 14.40%
Volume: 18,400 shares. 3 month avg: 69,928 shares.
This security may be thinly traded (less than 100k shares)!
Since 2009 bear market, the best buy day (fewest up closes) is Wednesday, and best sell day (most up closes) is Thursday.
 
Chart pattern: Double Top, Adam and Adam reversal pattern from 11/15/2017 to 12/01/2017
Breakout is downward 100% of the time.
Average decline: 19%.
Break-even failure rate: 8%.
Pullbacks occur 61% of the time.
Price hits measure rule target 72% of the time.

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SPDR Utilities Select Sector (XLU)
Industry: Electric Utility (Central)
Industry RS rank: 42 out of 56
Stock RS rank: 388 out of 585
12/7/17 close: $55.49
1 Month avg volatility: $0.54. Volatility stop (for downward breakout): $56.78 or 2.3% above the close.
Change YTD: 14.25%
Volume: 11,418,500 shares. 3 month avg: 12,090,022 shares.
Since 2009 bear market, the best buy day (fewest up closes) is Wednesday, and best sell day (most up closes) is Thursday.
 
Chart pattern: Double Top, Adam and Adam reversal pattern from 11/15/2017 to 12/01/2017
Breakout is downward 100% of the time.
Average decline: 19%.
Break-even failure rate: 8%.
Pullbacks occur 61% of the time.
Price hits measure rule target 72% of the time.

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Thursday 12/7/17. Intraday Market Direction: Nasdaq

The index climbed by 0.2% or 14.17 points. Since 02/05/1971 the index made 658 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 0.7% on 380 occasions.
     Average loss was -0.7% on 278 occasions.
Expect the index to close higher 57.8% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 138/246 or 56.1% of the time.
     The prediction of the index closing lower has been right 43/85 or 50.6% of the time.

Since I post this the night before, check how the futures are trading before market open. Large moves can affect the opening direction.

Picture of the Nasdaq composite on the 5 minute scale.

$ $ $

I show a picture of the Nasdaq composite on the 5-minute scale.

A double bottom appeared earlier in the week. I show that as AB. It confirmed as a valid chart pattern when the index closed above the green line.

The height of the double bottom, from lowest low to the peak between the two bottoms, added to the price of the peak, gives a price target. The index almost made it to the target the next day before tumbling.

The reason I mention the measure rule (described above, to find a target) so often is that it works well for short-term trades.

$ $ $

The following table shows where Fibonacci retrace values of the day's high-low range are plus pivot points, calculated on the Nasdaq composite, sorted by value. When several are near each other (small differences), the area might act as support or resistance.

-- Thomas Bulkowski

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© 2017 ThePatternSite.com    Metric  Value  Diff  Close (within 10% of the high-low range for the day)? 
 Monthly S2  6,483.71    
 Monthly S1  6,630.04  146.34   
 Weekly S2  6,632.21  2.17   Yes! The Weekly S2 is close to the Monthly S1.
 Weekly S1  6,704.30  72.08   
 Daily S2  6,712.69  8.39   
 Low  6,734.13  21.44   
 Open  6,742.07  7.94   
 Daily S1  6,744.53  2.46   Yes! The Daily S1 is close to the Open.
 61.8% Down from Intraday High  6,754.49  9.95   
 50% Down from Intraday High  6,760.77  6.29   
 Daily Pivot  6,765.98  5.20   Yes! The Daily Pivot is close to the 50% Down from Intraday High.
 38.2% Down from Intraday High  6,767.06  1.09   Yes! The 38.2% Down from Intraday High is close to the Daily Pivot.
 Monthly Pivot  6,772.12  5.05   Yes! The Monthly Pivot is close to the 38.2% Down from Intraday High.
 Close  6,776.38  4.26   Yes! The Close is close to the Monthly Pivot.
 High  6,787.42  11.04   
 Daily R1  6,797.82  10.40   
 Weekly Pivot  6,809.24  11.42   
 Daily R2  6,819.27  10.02   
 Weekly R1  6,881.33  62.06   
 Monthly R1  6,918.45  37.13   
 Weekly R2  6,986.27  67.82   
 Monthly R2  7,060.53  74.25   

Wednesday 12/6/17. A Look At Indicators

Picture of the chart pattern indicator

This is a picture of the chart pattern indicator on the daily scale. The indicator is the line chart below a chart of the S&P 500 composite.

Based on my own portfolio of stocks, over the last few days, I felt as if the Dow was making a move without taking the rest of the market with it. That told me it was weak (the overall market).

This chart, with a plunging indicator line (the thin blue one at screen bottom), confirms my suspicion.

However, since the indicator can change for up to a week, what you're seeing might not be real. I think it is, though.

Picture of the percent down indicators

The red line is the percentage of stocks at least 20% below their 1-year high (plotted upside down). The blue line is the average percentage drop of stocks below their 1-year high (plotted upside down).

Shown as a red line on the above chart...
On Monday, 20% of stocks in my database are in bear market territory (down at least 20% from their 1-year high).
A week ago, it was 23%.
The fewest was 13% on 12/09/2016.
And the most was 29% on 08/21/2017.
Shown as a blue line on the above chart...
The 495 stocks in my database are down an average of 12% from their yearly high.
A week ago, the average was 13%.
The peak was 9% on 12/09/2016.
And the bottom was 16% on 08/21/2017.

The more sensitive line, the red one, shows a dramatic improvement over the prior week's reading: from 23% bearish to 20% bearish.

Even the blue line shows improvement over the prior week.

Together, they are bullish while the CPI line is bearish. My guess, and it's only a guess, is that we're in for a retrace here. Congress will pass the tax cut and screw individuals who pay their health insurance (that is, not part of a group plan) and the markets will find something new to worry about. And that will send the averages lower.

But who knows? Maybe the indices will rocket higher...

-- Thomas Bulkowski

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Tuesday 12/5/17. Intraday Market Direction: Dow

The index climbed by 0.2% or 58.46 points. Since 10/01/1928 the index made 1292 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 0.5% on 703 occasions.
     Average loss was -0.5% on 589 occasions.
Expect the index to close higher 54.4% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 153/256 or 59.8% of the time.
     The prediction of the index closing lower has been right 32/65 or 49.2% of the time.

Since I post this the night before, check how the futures are trading before market open. Large moves can affect the opening direction.

Picture of the Dow industrials on the 5 minute scale.

$ $ $

I show a picture of the Dow industrials on the 5-minute scale.

At first, I wasn't going to draw any lines because nothing came to mind. No charts patterns, nothing of interest. Then the trend caught my eye so I drew the two red trendlines.

They form a chart pattern. Do you know what it is?

It's an ascending broadening wedge.

Those breakout downward 73% of the time, according to the statistics in my green book, Encyclopedia of Chart Patterns Second EditionEncyclopedia of Chart Patterns 2nd Edition book..

I show that pictured on the right.

It's a good book and it would make a terrific holiday gift idea. Buy a copy even if you already have one. I need to pay for the Republican tax cut which is predicted to boost individual health insurance premiums (like the one I use) by 10%. Add on the 20-30% rate increases the insurance companies have added the last two years and I'll be taking out another mortgage soon.

$ $ $

The following table shows where Fibonacci retrace values of the day's high-low range are plus pivot points, calculated on the Dow industrials, sorted by value. When several are near each other (small differences), the area might act as support or resistance.

-- Thomas Bulkowski

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© 2017 ThePatternSite.com    Metric  Value  Diff  Close (within 10% of the high-low range for the day)? 
 Monthly S2  22,868.47    
 Weekly S2  23,271.50  403.03   
 Monthly S1  23,579.26  307.76   
 Weekly S1  23,780.77  201.51   
 Monthly Pivot  23,953.54  172.77   
 Weekly Pivot  24,054.30  100.76   
 Daily S2  24,124.91  70.61   
 Daily S1  24,207.48  82.57   
 Low  24,288.19  80.71   
 Close  24,290.05  1.86   Yes! The Close is close to the Low.
 Daily Pivot  24,370.76  80.71   
 61.8% Down from Intraday High  24,382.11  11.35   Yes! The 61.8% Down from Intraday High is close to the Daily Pivot.
 50% Down from Intraday High  24,411.12  29.01   
 Open  24,424.11  12.99   Yes! The Open is close to the 50% Down from Intraday High.
 38.2% Down from Intraday High  24,440.13  16.02   Yes! The 38.2% Down from Intraday High is close to the Open.
 Daily R1  24,453.33  13.21   Yes! The Daily R1 is close to the 38.2% Down from Intraday High.
 High  24,534.04  80.71   
 Weekly R1  24,563.57  29.54   
 Daily R2  24,616.61  53.04   
 Monthly R1  24,664.33  47.72   
 Weekly R2  24,837.10  172.77   
 Monthly R2  25,038.61  201.51   

Monday 12/4/17. Market Monday: The Week Ahead

My Prediction

Picture of the S and P on the daily scale.

I show the S &P 500 index on the daily scale.

For lack of anything better to do, I drew two trendlines, following peaks and valleys.

Notice that the two trendlines converge. Those two converging lines form what's called a rising wedge.

The breakout is downward 69% of the time from a rising wedge. This chart is an example of an upward breakout.

But notice how the index has thrown back to the top of the wedge. That's typical behavior, so don't think it's the beginning of the end of the upward move.

 

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A Brief Look Back

Picture of a flower from my garden.

The following is a brief review of how the markets performed over time. The numbers refer to the close-to-close move in the Dow industrials.

Monday: Up 22.79 points.
Tuesday: Up 255.93 points.
Wednesday: Up 103.97 points.
Thursday: Up 331.67 points.
Friday: Down 40.76 points.

For the Week...

The Dow industrials were up 673.6 points or 2.9%.
The Nasdaq composite was down 41.57 points or 0.6%.
The S&P 500 index was up 39.8 points or 1.5%.

Year to Date...

Dow Industrials
     0.4% down from the high of 24,327.82 on 11/30/2017.
     23.1% up from the low of 19,677.94 on 01/19/2017.
Nasdaq
     1.0% down from the high of 6,914.19 on 11/28/2017.
     26.9% up from the low of 5,397.99 on 01/03/2017.
S&P 500
     0.6% down from the high of 2,657.74 on 11/30/2017.
     17.7% up from the low of 2,245.13 on 01/03/2017.

Options Expiration

No options expire this week.

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Swing and Position Traders: Chart Pattern Indicator

As of 12/01/2017, the CPI had:

4 bearish patterns,
16 bullish patterns,
105 patterns waiting for breakout.
The CPI signal is 80.0%, which is bullish (>= 65%).

The chart pattern indicator is bullish with 3 of 3 full triangles showing (). Additional triangles are a measure of strength with solid triangles meaning a more reliable signal than half triangles.

Swing Traders: Pivot Points

The following is based on an SFO article in December 2004 by John Seekinger, titled, "Take a two-dimensional approach." He offers these tips.

IndexS2S1PivotR1R2
Dow Industrials (^DJI): Daily  23,758  23,995  24,159  24,395  24,559 
Weekly  23,252  23,742  24,035  24,525  24,818 
Monthly  22,849  23,540  23,934  24,625  25,019 
S&P500 (^GSPC): Daily  2,588  2,615  2,633  2,660  2,678 
Weekly  2,574  2,608  2,633  2,667  2,692 
Monthly  2,519  2,581  2,619  2,681  2,719 
Nasdaq (^IXIC): Daily  6,684  6,766  6,819  6,901  6,954 
Weekly  6,656  6,752  6,833  6,929  7,010 
Monthly  6,507  6,678  6,796  6,966  7,084 
  • Seekinger doesn't look at the range of S2 to R2 as support and resistance levels. Rather, he considers them oversold (S) and overbought (R) areas.
  • S2 to R2 range of values across daily, weekly, and monthly periods: If two values are close together then they lend more significance to the area.
  • If the market trends on day 1, the odds rise tremendously that the market will be range bound between daily S1 and daily R1 the next day.
  • In a quiet market when traders are waiting for an important earnings announcement or economic report, look for daily R1 and S1 levels to hold and for the market to return to the daily pivot.
  • A move outside of daily R1 or S1 usually does not mean a breakout.
  • The odds suggest that the entire week's price action will remain between weekly R2 and S2.
  • Avoid going long when the market moves above weekly R2 (it's overbought) and avoid going short when price moves below weekly S2 (oversold).
  • Consider going short at weekly R1 or long at weekly S1 with a profit objective of the weekly pivot.
  • Consider going long at weekly S2 or short at weekly R2 with a profit objective of weekly S1 or R1, respectively.

Here are the formulas:

Pivot point: P = (H + L + C)/3
First resistance level: R1 = (2 * P) - L
First support level: S1 = (2 * P) - H)
Second resistance level: R2 = P + (R1 - S1)
Second support level: S2 = P - (R1 - S1)
H = high price , L=low price, C=closing price

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Consecutive Price Trends

Index Consecutive
Closes So Far 
% Comments 
 Dow industrials (^DJI) 2 weeks up 31.6%   The trend may continue. 
 1 month down 20.5%   Expect a reversal soon. 
 S & P 500 (^GSPC) 2 weeks up 32.1%   The trend may continue. 
 1 month down 21.2%   Expect a reversal soon. 
 Nasdaq composite (^IXIC) 1 week down 27.5%   The trend may continue. 
 1 month down 25.6%   The trend may continue. 

How long can an index close higher (or lower) each day? The adjacent table shows how often consecutive up or down closes occur in the indices, based on the most recent trend of closes.

Low percentages suggest the market is overdue to turn (think of it as the likelihood that next week or next month will continue the trend, based on historical performance). Values of 50% mean random, so most percentages will be lower.

The analysis uses data going back 10 years for weekly percentages and 25 years for monthly percentages (or the start of data, whichever is more recent). Any unchanged closing price is interpreted as the end of the string of consecutive up or down closes.

Earnings, Chart Patterns & Industries

Earnings season is over.

Mutual funds will begin dividend distributions and rebalancing their portfolios for the approaching year end (starts in late November).

 Found Chart Pattern Name
16Pipe bottom
13Double Bottom, Adam and Adam
8Head-and-shoulders top
8Double Top, Adam and Adam
8Triangle, symmetrical
7Dead-cat bounce
6Triangle, ascending
5Pipe top
5Broadening top
4Head-and-shoulders bottom

Large numbers of bullish or bearish chart patterns can signal short- to intermediate-term market trends (many bullish chart patterns can mean an uptrend will continue, for example). However, please realize that the short-term price trend could have changed since the pattern was discovered (this is especially true of pipe tops or bottoms, which are weekly patterns).

The 10 types of most frequently appearing chart patterns in the stocks, indices, and long-only exchange traded funds I follow during the last month are shown in the adjacent table.

 

 

 

 

The industries I follow were the best (rank 1) and worst performing.

This WeekLast Week
1. Trucking/Transp. Leasing1. Semiconductor
2. Homebuilding2. Human Resources
3. Human Resources3. Trucking/Transp. Leasing
4. Securities Brokerage4. Homebuilding
5. Retail Building Supply5. Shoe
50. Chemical (Specialty)50. Oilfield Svcs/Equipment
51. Food Processing51. Retail (Special Lines)
52. Biotechnology52. Cement and Aggregates
53. Cement and Aggregates53. Food Processing
54. Household Products54. Household Products
55. Drug55. Drug
56. Advertising56. Advertising
57. Short ETFs57. Short ETFs

-- Thomas Bulkowski

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Friday 12/1/17. Pattern Trading Setups for the Weekend.

Go to Table.

You can find setups based on a Fibonacci retrace by clicking on the link.

Click the link for a list of symbols from the table.

The following patterns were found manually, so the results may differ from those found using Patternz.

There were 15 patterns found this week (excluding pipe bottoms; pipe tops and bottoms are found looking back 2 weeks) out of 593 stocks searched, or 2.5%. Based on the percentage, the stock market is trending since few consolidation patterns appear.

I found 1 pipe bottom chart patterns, which is neutral. High numbers of pipe bottoms can signal a bullish move (I see many of them just before a bear market ends or during a bear market rally. Often it means the first bottom of a double bottom has formed. Thus, expect a move down to the second bottom).

Excluding ETFs, there were 10 bullish chart patterns this week and 3 bearish ones with any remaining (1) being undecided. The ratio of bullish to bearish patterns suggests the market is hinting of a coming bullish (up) turn.

In the table below, the red and green colors are based on the historical breakout direction for the associated chart pattern. If a high and tight flag appears, the start and end dates highlight the flagpole only and not the flag.

More...

-- Thomas Bulkowski

 

Symbol Chart Pattern Bullish
Bearish
Start End Industry
AYIDouble Bottom, Adam and Adam      11/09/201711/27/2017Furn/Home Furnishings
BATriangle, ascending      10/24/201711/28/2017Aerospace/Defense
ETHHead-and-shoulders bottom      10/12/201711/28/2017Furn/Home Furnishings
FLIRRectangle top      10/30/201711/30/2017Aerospace/Defense
FMCTriangle, ascending      11/02/201711/30/2017Chemical (Basic)
ICONPipe top      11/13/201711/20/2017Shoe
IIINBroadening bottom      11/03/201711/29/2017Building Materials
IPGHead-and-shoulders bottom      11/08/201711/27/2017Advertising
PDCOPipe bottom      11/13/201711/20/2017Medical Supplies
PFETriangle, ascending      10/31/201711/27/2017Drug
RTNTriangle, symmetrical      10/26/201711/24/2017Aerospace/Defense
SMTCHead-and-shoulders top      10/12/201711/24/2017Semiconductor Cap Equip.
TMKTriangle, symmetrical      10/25/201711/24/2017Insurance (Diversified)
RIGBroadening top      09/28/201711/27/2017Oilfield Svcs/Equipment
EWATriangle, ascending      09/12/201711/30/2017Investment Co. (Foreign)
EWTBroadening top      10/16/201711/24/2017Investment Co. (Foreign)

 

Weekly screen for chart patterns ending between 11/23/2017 and 11/30/2017. Many may be still in development. If no securities appear, then I have not identified any new patterns.

Definitions
RS is relative strength (where 1 is best). For other definitions, see the glossary.
’Breakout is upward/downward 100% of the time’ means price breaks out up/down by definition, not by statistically measuring the rate.
All numbers assume a bull market and are based on the breakout direction that occurs most often.
For more information, consult my book, Encyclopedia of Chart Patterns, Second Edition.
 
Acuity Brands, Inc (AYI)
Industry: Furn/Home Furnishings
Industry RS rank: 39 out of 56
Stock RS rank: 374 out of 585
11/30/17 close: $171.42
1 Month avg volatility: $4.30. Volatility stop (for upward breakout): $160.59 or 6.3% below the close.
Change YTD: -25.75%
Volume: 632,200 shares. 3 month avg: 620,208 shares.
Since 2009 bear market, the best buy day (fewest up closes) is Monday, and best sell day (most up closes) is Friday.
 
Chart pattern: Double Bottom, Adam and Adam reversal pattern from 11/09/2017 to 11/27/2017
Breakout is upward 100% of the time.
Average rise: 35%.
Break-even failure rate: 5%.
Throwbacks occur 64% of the time.
Price hits measure rule target 66% of the time.

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Boeing Company, The (BA)
Industry: Aerospace/Defense
Industry RS rank: 12 out of 56
Stock RS rank: 31 out of 585
11/30/17 close: $276.80
1 Month avg volatility: $3.31. Volatility stop (for upward breakout): $262.81 or 5.1% below the close.
Change YTD: 77.80%
Volume: 4,718,600 shares. 3 month avg: 3,163,823 shares.
Since 2009 bear market, the best buy day (fewest up closes) is Wednesday, and best sell day (most up closes) is Thursday.
 
Chart pattern: Triangle, ascending reversal pattern from 10/24/2017 to 11/28/2017
Breakout is upward 70% of the time.
Average rise: 35%.
Break-even failure rate: 13%.
Throwbacks occur 57% of the time.
Price hits measure rule target 75% of the time.

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Ethan Allen Interiors Inc (ETH)
Industry: Furn/Home Furnishings
Industry RS rank: 39 out of 56
Stock RS rank: 315 out of 585
11/30/17 close: $29.40
1 Month avg volatility: $0.79. Volatility stop (for upward breakout): $27.36 or 6.9% below the close.
Change YTD: -20.22%
Volume: 235,600 shares. 3 month avg: 315,668 shares.
Since 2009 bear market, the best buy day (fewest up closes) is Thursday, and best sell day (most up closes) is Tuesday.
 
Chart pattern: Head-and-shoulders bottom reversal pattern from 10/12/2017 to 11/28/2017
Breakout is upward 100% of the time.
Average rise: 38%.
Break-even failure rate: 3%.
Throwbacks occur 45% of the time.
Price hits measure rule target 74% of the time.

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Flir Systems Inc (FLIR)
Industry: Aerospace/Defense
Industry RS rank: 12 out of 56
Stock RS rank: 127 out of 585
11/30/17 close: $46.58
1 Month avg volatility: $0.74. Volatility stop (for upward breakout): $44.87 or 3.7% below the close.
Change YTD: 28.71%
Volume: 2,334,000 shares. 3 month avg: 1,139,475 shares.
Since 2009 bear market, the best buy day (fewest up closes) is Monday, and best sell day (most up closes) is Tuesday.
 
Chart pattern: Rectangle top continuation pattern from 10/30/2017 to 11/30/2017
Breakout is upward 68% of the time.
Average rise: 39%.
Break-even failure rate: 9%.
Throwbacks occur 64% of the time.
Price hits measure rule target 80% of the time.

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FMC Corp. (FMC)
Industry: Chemical (Basic)
Industry RS rank: 6 out of 56
Stock RS rank: 105 out of 585
11/30/17 close: $94.40
1 Month avg volatility: $1.89. Volatility stop (for upward breakout): $89.43 or 5.3% below the close.
Change YTD: 66.90%
Volume: 1,142,700 shares. 3 month avg: 1,121,235 shares.
Since 2009 bear market, the best buy day (fewest up closes) is Monday, and best sell day (most up closes) is Thursday.
 
Chart pattern: Triangle, ascending reversal pattern from 11/02/2017 to 11/30/2017
Breakout is upward 70% of the time.
Average rise: 35%.
Break-even failure rate: 13%.
Throwbacks occur 57% of the time.
Price hits measure rule target 75% of the time.

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Iconix Brand Group Inc. (ICON)
Industry: Shoe
Industry RS rank: 16 out of 56
Stock RS rank: 585 out of 585
11/30/17 close: $1.88
1 Month avg volatility: $0.28. Volatility stop (for downward breakout): $2.54 or 35.4% above the close.
Change YTD: -79.87%
Volume: 3,875,800 shares. 3 month avg: 2,014,411 shares.
Since 2009 bear market, the best buy day (fewest up closes) is Friday, and best sell day (most up closes) is Monday.
 
Chart pattern: Pipe top reversal pattern from 11/13/2017 to 11/20/2017
WARNING: A dead-cat bounce occurred on 10/30/2017. There is a 26% chance that a 15% or higher decline will occur (or has occurred since then) by 01/29/2018 and a 38% chance by 04/30/2018.
Breakout is downward 100% of the time.
Average decline: 20%.
Break-even failure rate: 11%.
Pullbacks occur 41% of the time.
Price hits measure rule target 70% of the time.

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Insteel Industries Inc (IIIN)
Industry: Building Materials
WARNING: This industry is within the top 7 that Dead-cat bounce often.
Industry RS rank: 11 out of 56
Stock RS rank: 535 out of 585
11/30/17 close: $27.55
1 Month avg volatility: $0.80. Volatility stop (for upward breakout): $25.51 or 7.4% below the close.
Change YTD: -22.70%
Volume: 92,800 shares. 3 month avg: 160,468 shares.
Since 2009 bear market, the best buy day (fewest up closes) is Monday, and best sell day (most up closes) is Tuesday.
 
Chart pattern: Broadening bottom reversal pattern from 11/03/2017 to 11/29/2017
Breakout is upward 53% of the time.
Average rise: 27%.
Break-even failure rate: 10%.
Throwbacks occur 41% of the time.
Price hits measure rule target 59% of the time.

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Interpublic Group of Companies (IPG)
Industry: Advertising
Industry RS rank: 55 out of 56
Stock RS rank: 558 out of 585
11/30/17 close: $19.78
1 Month avg volatility: $0.43. Volatility stop (for upward breakout): $18.65 or 5.7% below the close.
Change YTD: -15.51%
Volume: 8,691,900 shares. 3 month avg: 6,575,063 shares.
Since 2009 bear market, the best buy day (fewest up closes) is Wednesday, and best sell day (most up closes) is Friday.
 
Chart pattern: Head-and-shoulders bottom reversal pattern from 11/08/2017 to 11/27/2017
Breakout is upward 100% of the time.
Average rise: 38%.
Break-even failure rate: 3%.
Throwbacks occur 45% of the time.
Price hits measure rule target 74% of the time.

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Patterson Companies Inc. (PDCO)
Industry: Medical Supplies
Industry RS rank: 24 out of 56
Stock RS rank: 550 out of 585
11/30/17 close: $36.55
1 Month avg volatility: $1.17. Volatility stop (for upward breakout): $33.86 or 7.4% below the close.
Change YTD: -10.92%
Volume: 7,433,500 shares. 3 month avg: 1,766,671 shares.
Since 2009 bear market, the best buy day (fewest up closes) is Friday, and best sell day (most up closes) is Thursday.
 
Chart pattern: Pipe bottom reversal pattern from 11/13/2017 to 11/20/2017
Breakout is upward 100% of the time.
Average rise: 45%.
Break-even failure rate: 5%.
Throwbacks occur 44% of the time.
Price hits measure rule target 83% of the time.

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Pfizer Inc. (PFE)
Industry: Drug
WARNING: This industry is within the top 7 that Dead-cat bounce often.
Industry RS rank: 53 out of 56
Stock RS rank: 293 out of 585
11/30/17 close: $36.26
1 Month avg volatility: $0.40. Volatility stop (for upward breakout): $35.28 or 2.7% below the close.
Change YTD: 11.64%
Volume: 21,756,800 shares. 3 month avg: 16,111,892 shares.
Since 2009 bear market, the best buy day (fewest up closes) is Thursday, and best sell day (most up closes) is Monday.
 
Chart pattern: Triangle, ascending reversal pattern from 10/31/2017 to 11/27/2017
Breakout is upward 70% of the time.
Average rise: 35%.
Break-even failure rate: 13%.
Throwbacks occur 57% of the time.
Price hits measure rule target 75% of the time.

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Raytheon Co. (RTN)
Industry: Aerospace/Defense
Industry RS rank: 12 out of 56
Stock RS rank: 218 out of 585
11/30/17 close: $191.15
1 Month avg volatility: $2.12. Volatility stop (for upward breakout): $184.40 or 3.5% below the close.
Change YTD: 34.61%
Volume: 2,942,500 shares. 3 month avg: 1,322,426 shares.
Since 2009 bear market, the best buy day (fewest up closes) is Monday, and best sell day (most up closes) is Wednesday.
 
Chart pattern: Triangle, symmetrical continuation pattern from 10/26/2017 to 11/24/2017
Breakout is upward 54% of the time.
Average rise: 31%.
Break-even failure rate: 9%.
Throwbacks occur 37% of the time.
Price hits measure rule target 66% of the time.

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Semtech Corp (SMTC)
Industry: Semiconductor Cap Equip.
WARNING: This industry is within the top 7 that Dead-cat bounce often.
Industry RS rank: 30 out of 56
Stock RS rank: 528 out of 585
11/30/17 close: $34.05
1 Month avg volatility: $1.51. Volatility stop (for downward breakout): $39.32 or 15.5% above the close.
Change YTD: 7.92%
Volume: 2,750,400 shares. 3 month avg: 505,986 shares.
Since 2009 bear market, the best buy day (fewest up closes) is Thursday, and best sell day (most up closes) is Wednesday.
 
Chart pattern: Head-and-shoulders top reversal pattern from 10/12/2017 to 11/24/2017
Breakout is downward 100% of the time.
Average decline: 22%.
Break-even failure rate: 4%.
Pullbacks occur 50% of the time.
Price hits measure rule target 55% of the time.

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Torchmark Corp (TMK)
Industry: Insurance (Diversified)
Industry RS rank: 28 out of 56
Stock RS rank: 195 out of 585
11/30/17 close: $88.85
1 Month avg volatility: $0.98. Volatility stop (for upward breakout): $86.79 or 2.3% below the close.
Change YTD: 20.46%
Volume: 929,700 shares. 3 month avg: 407,677 shares.
Since 2009 bear market, the best buy day (fewest up closes) is Monday, and best sell day (most up closes) is Thursday.
 
Chart pattern: Triangle, symmetrical continuation pattern from 10/25/2017 to 11/24/2017
Breakout is upward 54% of the time.
Average rise: 31%.
Break-even failure rate: 9%.
Throwbacks occur 37% of the time.
Price hits measure rule target 66% of the time.

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Transocean Inc. (RIG)
Industry: Oilfield Svcs/Equipment
Industry RS rank: 49 out of 56
Stock RS rank: 289 out of 585
11/30/17 close: $10.11
1 Month avg volatility: $0.35. Volatility stop (for downward breakout): $11.11 or 9.9% above the close.
Change YTD: -31.41%
Volume: 11,409,200 shares. 3 month avg: 14,182,403 shares.
Since 2009 bear market, the best buy day (fewest up closes) is Monday, and best sell day (most up closes) is Thursday.
 
Chart pattern: Broadening top reversal pattern from 09/28/2017 to 11/27/2017
Breakout is downward 50% of the time.
Average decline: 15%.
Break-even failure rate: 18%.
Pullbacks occur 48% of the time.
Price hits measure rule target 37% of the time.

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MSCI Australia Index fund (EWA)
Industry: Investment Co. (Foreign)
Industry RS rank: 37 out of 56
Stock RS rank: 362 out of 585
11/30/17 close: $22.84
1 Month avg volatility: $0.12. Volatility stop (for upward breakout): $22.50 or 1.5% below the close.
Change YTD: 12.90%
Volume: 2,209,000 shares. 3 month avg: 1,860,012 shares.
Since 2009 bear market, the best buy day (fewest up closes) is Friday, and best sell day (most up closes) is Tuesday.
 
Chart pattern: Triangle, ascending reversal pattern from 09/12/2017 to 11/30/2017
Breakout is upward 70% of the time.
Average rise: 35%.
Break-even failure rate: 13%.
Throwbacks occur 57% of the time.
Price hits measure rule target 75% of the time.

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MSCI Taiwan Index (EWT)
Industry: Investment Co. (Foreign)
Industry RS rank: 37 out of 56
Stock RS rank: 336 out of 585
11/30/17 close: $37.05
1 Month avg volatility: $0.20. Volatility stop (for downward breakout): $37.53 or 1.3% above the close.
Change YTD: 26.15%
Volume: 10,224,000 shares. 3 month avg: 3,251,511 shares.
Since 2009 bear market, the best buy day (fewest up closes) is Monday, and best sell day (most up closes) is Wednesday.
 
Chart pattern: Broadening top reversal pattern from 10/16/2017 to 11/24/2017
Breakout is downward 50% of the time.
Average decline: 15%.
Break-even failure rate: 18%.
Pullbacks occur 48% of the time.
Price hits measure rule target 37% of the time.

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