Written by and copyright © 2005-2018 by Thomas N. Bulkowski. All rights reserved. Disclaimer: You alone are responsible for your investment decisions. See Privacy/Disclaimer for more information. Some pattern names are the registered trademarks of their respective owners.

Monday 8/20/18. Market Monday: The Week Ahead

• My Prediction
• A Brief Look Back
• Options Expiration
• Swing and Position Traders: Chart Pattern Indicator
• Swing Traders: Pivot Points
• Consecutive Price Trends
• Earnings, Chart Patterns & Industries

My Prediction

I show the Nasdaq composite on the daily scale.

After I drew the two red lines, the pattern reminded me of a rising wedge.

The rising wedge has two rising and converging trendlines.

What interests me most is that price failed to rise up to the top trendline at A.

I've written about partial rises before (this week, in fact) but not in a wedge.

A partial rise suggests weakness. Indeed, the index has dropped to the bottom trendline. We'll have to wait and see if the index will bounce off that line and move upward or drop through it.

With so many prior trendline touches (6 so far), a pierce would be a significant event. But it also denotes strength (support), so we could see a bounce upward.

Of course, one could argue that so many trendline touches means support has burned away and it's time for a plunge.

I hate saying I don't know what's going to happen, but it's true.

$ $ $

I updated the statistics on the cup with handle chart pattern. The performance has improved...

A Brief Look Back

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.

For the Week...

Year to Date...

Options Expiration

No options expire this week.

Swing and Position Traders: Chart Pattern Indicator

As of 08/17/2018, the CPI had:

The chart pattern indicator is bullish with 2 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.

• 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:

Consecutive Price Trends

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 either underway or should be starting soon. The sessions could be more volatile.

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.

-- Thomas Bulkowski

Friday 8/17/18. Pattern Trading Setups for the Weekend.

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 610 stocks searched, or 1.6%. 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 4 bullish chart patterns this week and 5 bearish ones with any remaining (2) 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

Weekly screen for chart patterns ending between 08/09/2018 and 08/16/2018. Many may be still in development. If no securities appear, then I have not identified any new patterns.

Industry: Air Transport

Industry RS rank: 32 out of 58

Stock RS rank: 412 out of 603

8/16/18 close: $64.31

1 Month avg volatility: $1.84. Volatility stop (for downward breakout): $69.06 or 7.4% above the close.

Change YTD: -12.52%

Volume: 2,063,200 shares. 3 month avg: 1,966,126 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: Diamond top reversal pattern from 07/09/2018 to 08/15/2018

Breakout is downward 69% of the time.

Average decline: 21%.

Break-even failure rate: 6%.

Pullbacks occur 57% of the time.

Price hits measure rule target 76% of the time.

Industry: Computers and Peripherals

WARNING: This industry is within the top 7 that Dead-cat bounce often.

Industry RS rank: 3 out of 58

Stock RS rank: 84 out of 603

8/16/18 close: $213.32

1 Month avg volatility: $3.00. Volatility stop (for upward breakout): $205.47 or 3.7% below the close.

Change YTD: 26.05%

Volume: 27,611,400 shares. 3 month avg: 27,687,312 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: Flag continuation pattern from 08/03/2018 to 08/15/2018

Breakout is upward 54% of the time.

Average rise: 23%.

Break-even failure rate: 4%.

Throwbacks occur 43% of the time.

Price hits measure rule target 64% of the time.

Industry: Precision Instrument

Industry RS rank: 38 out of 58

Stock RS rank: 288 out of 603

8/16/18 close: $52.05

1 Month avg volatility: $1.34. Volatility stop (for upward breakout): $49.22 or 5.4% below the close.

Change YTD: 8.89%

Volume: 69,800 shares. 3 month avg: 149,246 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: Triangle, symmetrical continuation pattern from 07/23/2018 to 08/16/2018

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.

Industry: Electric Utility (East)

Industry RS rank: 22 out of 58

Stock RS rank: 294 out of 603

8/16/18 close: $80.71

1 Month avg volatility: $1.08. Volatility stop (for upward breakout): $77.25 or 4.3% below the close.

Change YTD: -4.99%

Volume: 2,286,900 shares. 3 month avg: 1,605,666 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: Triangle, ascending reversal pattern from 07/13/2018 to 08/14/2018

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.

Industry: Petroleum (Integrated)

Industry RS rank: 12 out of 58

Stock RS rank: 94 out of 603

8/16/18 close: $69.41

1 Month avg volatility: $1.21. Volatility stop (for downward breakout): $72.09 or 3.9% above the close.

Change YTD: 26.45%

Volume: 5,418,000 shares. 3 month avg: 6,156,062 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: Head-and-shoulders top reversal pattern from 07/30/2018 to 08/14/2018

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.

Industry: Information Services

Industry RS rank: 24 out of 58

Stock RS rank: 191 out of 603

8/16/18 close: $129.76

1 Month avg volatility: $1.75. Volatility stop (for downward breakout): $133.99 or 3.3% above the close.

Change YTD: 10.04%

Volume: 485,600 shares. 3 month avg: 3,458,600 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 06/11/2018 to 08/16/2018

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.

Industry: Retail Store

Industry RS rank: 20 out of 58

Stock RS rank: 600 out of 603

8/16/18 close: $1.76

1 Month avg volatility: $0.11. Volatility stop (for downward breakout): $2.19 or 24.3% above the close.

Change YTD: -44.30%

Volume: 83,752,400 shares. 3 month avg: 17,298,666 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: Dead-cat bounce continuation pattern from 08/16/2018 to 08/16/2018

Breakout is downward 67% of the time.

Average decline: 18%.

Industry: Advertising

Industry RS rank: 55 out of 58

Stock RS rank: 219 out of 603

8/16/18 close: $75.75

1 Month avg volatility: $1.14. Volatility stop (for downward breakout): $78.23 or 3.3% above the close.

Change YTD: 2.03%

Volume: 360,100 shares. 3 month avg: 612,354 shares.

Since 2009 bear market, the best buy day (fewest up closes) is Tuesday, and best sell day (most up closes) is Thursday.

 

Chart pattern: Broadening wedge, ascending reversal pattern from 07/19/2018 to 08/15/2018

Breakout is downward 73% of the time.

Average decline: 17%.

Break-even failure rate: 11%.

Pullbacks occur 57% of the time.

Price hits measure rule target 58% of the time.

Industry: Natural Gas (Distributor)

Industry RS rank: 10 out of 58

Stock RS rank: 110 out of 603

8/16/18 close: $46.90

1 Month avg volatility: $0.90. Volatility stop (for downward breakout): $48.89 or 4.2% above the close.

Change YTD: 16.67%

Volume: 315,200 shares. 3 month avg: 424,785 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 07/19/2018 to 08/16/2018

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.

Industry: Apparel

Industry RS rank: 21 out of 58

Stock RS rank: 355 out of 603

8/16/18 close: $51.38

1 Month avg volatility: $1.16. Volatility stop (for upward breakout): $48.48 or 5.7% below the close.

Change YTD: 16.17%

Volume: 3,721,800 shares. 3 month avg: 3,145,718 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: Pipe bottom reversal pattern from 07/30/2018 to 08/06/2018

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.

Industry: Retail Store

Industry RS rank: 20 out of 58

Stock RS rank: 377 out of 603

8/16/18 close: $3.00

1 Month avg volatility: $0.11. Volatility stop (for downward breakout): $3.28 or 9.2% above the close.

Change YTD: 9.09%

Volume: 312,600 shares. 3 month avg: 391,566 shares.

Since 2009 bear market, the best buy day (fewest up closes) is Tuesday, and best sell day (most up closes) is Monday.

 

Chart pattern: Rectangle bottom continuation pattern from 06/04/2018 to 08/16/2018

Breakout is downward 55% of the time.

Average decline: 14%.

Break-even failure rate: 16%.

Pullbacks occur 69% of the time.

Price hits measure rule target 50% of the time.

Thursday 8/16/18. Intraday Market Direction: Nasdaq

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

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

The index took a big dive right from the opening. It hit bottom at A, bounced up to the red line, and then dropped back down to B.

That pattern formed the beginning of a double bottom.

The pattern became real when the index closed above the red line. The problem is, I'm not sure it's happened yet. If it has, then it suggests an upward move tomorrow. No guarantees, of course and I've been wrong a lot recently. The above probabilities suggest a lower close, too, so who knows what will happen.

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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

Written by and copyright © 2005-2018 by Thomas N. Bulkowski. All rights reserved. Disclaimer: You alone are responsible for your investment decisions. See Privacy/Disclaimer for more information. Some pattern names are the registered trademarks of their respective owners.