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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
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Market
Industrials (^DJI):
Transports (^DJT):
Utilities (^DJU):
Nasdaq (^IXIC):
S&P500 (^GSPC):
As of 10/19/2018
25,444 64.89 0.3%
10,439 34.57 0.3%
746 11.47 1.6%
7,449 -36.11 -0.5%
2,768 -1.00 0.0%
YTD
2.9%
-1.6%
3.2%
7.9%
3.5%
Tom's Targets    Overview: 10/11/2018
26,000 or 24,600 by 11/01/2018
10,200 or 11,100 by 11/01/2018
755 or 715 by 11/01/2018
7,700 or 7,200 by 11/01/2018
2,850 or 2,700 by 11/01/2018

  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.

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Monday 10/22/18. Market Monday: The Week Ahead

My Prediction

Picture of the Dow transports on the daily scale.

Not much is happening on this chart of the Dow Transports on the daily scale.

The index is in the process of forming a double bottom at AB.

This chart pattern won't confirm as a valid one until the index closes above C. It has a ways to go to get there and you might think it's too far away.

Maybe not.

Look at the rise from the DE bottom. To confirmed this double bottom, the index had to close above F, which it did.

So if everyone were to jump into the market, we could push the index back up and confirm this double bottom.

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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: Down 89.44 points.
Tuesday: Up 547.87 points.
Wednesday: Down 91.74 points.
Thursday: Down 327.23 points.
Friday: Up 64.89 points.

For the Week...

The Dow industrials were up 104.35 points or 0.4%.
The Nasdaq composite was down 47.86 points or 0.6%.
The S&P 500 index was up 0.65 points or 0.0%.

Year to Date...

Dow Industrials
     5.6% down from the high of 26,951.81 on 10/03/2018.
     9.0% up from the low of 23,344.52 on 04/02/2018.
Nasdaq
     8.4% down from the high of 8,133.30 on 08/30/2018.
     12.3% up from the low of 6,630.67 on 02/09/2018.
S&P 500
     5.9% down from the high of 2,940.91 on 09/21/2018.
     9.3% up from the low of 2,532.69 on 02/09/2018.

Options Expiration

No options expire this week.

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Swing and Position Traders: Chart Pattern Indicator

As of 10/19/2018, the CPI had:

36 bearish patterns,
11 bullish patterns,
346 patterns waiting for breakout.
The CPI signal is 23.4%, which is bearish (<= 35%).

The chart pattern indicator is bearish with 1 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  25,209  25,327  25,468  25,585  25,726 
Weekly  24,918  25,181  25,499  25,763  26,081 
Monthly  23,713  24,579  25,765  26,631  27,817 
S&P500 (^GSPC): Daily  2,738  2,753  2,775  2,790  2,813 
Weekly  2,710  2,739  2,778  2,807  2,846 
Monthly  2,576  2,672  2,806  2,902  3,037 
Nasdaq (^IXIC): Daily  7,332  7,391  7,487  7,545  7,641 
Weekly  7,236  7,343  7,507  7,613  7,777 
Monthly  6,777  7,113  7,610  7,946  8,443 
  • 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) 1 week up 45.0%   Expect a random direction. 
 1 month down 21.3%   Expect a reversal soon. 
 S & P 500 (^GSPC) 1 week up 45.6%   Expect a random direction. 
 1 month down 21.9%   Expect a reversal soon. 
 Nasdaq composite (^IXIC) 3 weeks down 8.0%   Expect a reversal soon. 
 2 months down 15.5%   Expect a reversal soon. 

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.

 Found Chart Pattern Name
32Double Top, Adam and Adam
24Head-and-shoulders top
12Triple top
11Pipe top
9Double Top, Adam and Eve
8Double Top, Eve and Adam
7Triangle, symmetrical
5Double Top, Eve and Eve
5Broadening top
4Diamond 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. Short ETFs1. Short ETFs
2. Healthcare Information2. Healthcare Information
3. Medical Services3. Medical Services
4. Computers and Peripherals4. Medical Supplies
5. Electric Utility (Central)5. Computers and Peripherals

-- Thomas Bulkowski

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Friday 10/19/18. 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 5 patterns found this week (excluding pipe bottoms; pipe tops and bottoms are found looking back 2 weeks) out of 604 stocks searched, or 0.8%. Based on the percentage, the stock market is trending since few consolidation patterns appear.

Excluding ETFs, there were 2 bullish chart patterns this week and 1 bearish ones with any remaining (2) 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
ANTMBroadening top      09/17/201810/18/2018Medical Services
LANCDouble Bottom, Adam and Adam      10/03/201810/12/2018Food Processing
MGEEDiamond bottom      09/26/201810/18/2018Electric Utility (Central)
NXGNTriple bottom      10/02/201810/12/2018Healthcare Information
SWNTriangle, symmetrical      09/04/201810/18/2018Natural Gas (Diversified)

 

Weekly screen for chart patterns ending between 10/11/2018 and 10/18/2018. 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.
 
Anthem (ANTM)
Industry: Medical Services
Industry RS rank: 3 out of 58
Stock RS rank: 60 out of 597
10/18/18 close: $281.19
1 Month avg volatility: $4.46. Volatility stop (for downward breakout): $291.47 or 3.7% above the close.
Change YTD: 24.97%
Volume: 903,800 shares. 3 month avg: 1,801,302 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: Broadening top reversal pattern from 09/17/2018 to 10/18/2018
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.

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Lancaster Colony Corp (LANC)
Industry: Food Processing
Industry RS rank: 14 out of 58
Stock RS rank: 71 out of 597
10/18/18 close: $150.71
1 Month avg volatility: $2.95. Volatility stop (for upward breakout): $143.68 or 4.7% below the close.
Change YTD: 16.64%
Volume: 73,700 shares. 3 month avg: 112,417 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: Double Bottom, Adam and Adam reversal pattern from 10/03/2018 to 10/12/2018
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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MGE Energy Inc (MGEE)
Industry: Electric Utility (Central)
Industry RS rank: 7 out of 58
Stock RS rank: 168 out of 597
10/18/18 close: $62.43
1 Month avg volatility: $1.58. Volatility stop (for upward breakout): $58.49 or 6.3% below the close.
Change YTD: -1.06%
Volume: 30,800 shares. 3 month avg: 83,160 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 Tuesday.
 
Chart pattern: Diamond bottom reversal pattern from 09/26/2018 to 10/18/2018
Breakout is upward 69% of the time.
Average rise: 36%.
Break-even failure rate: 4%.
Throwbacks occur 53% of the time.
Price hits measure rule target 81% of the time.

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NextGen Healthcare Inc (NXGN)
Industry: Healthcare Information
Industry RS rank: 2 out of 58
Stock RS rank: 31 out of 597
10/18/18 close: $19.79
1 Month avg volatility: $0.66. Volatility stop (for upward breakout): $18.29 or 7.6% below the close.
Change YTD: 45.73%
Volume: 221,000 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: Triple bottom reversal pattern from 10/02/2018 to 10/12/2018
Breakout is upward 100% of the time.
Average rise: 37%.
Break-even failure rate: 4%.
Throwbacks occur 64% of the time.
Price hits measure rule target 64% of the time.

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Southwestern Energy Company (SWN)
Industry: Natural Gas (Diversified)
Industry RS rank: 17 out of 58
Stock RS rank: 59 out of 597
10/18/18 close: $5.55
1 Month avg volatility: $0.25. Volatility stop (for upward breakout): $4.90 or 11.8% below the close.
Change YTD: -4.80%
Volume: 18,246,600 shares. 3 month avg: 16,683,949 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: Triangle, symmetrical continuation pattern from 09/04/2018 to 10/18/2018
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.

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Thursday 10/18/18. Intraday Market Direction: Nasdaq

The index dropped by 0.0% or -2.79 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 372 occasions.
     Average loss was -0.9% on 286 occasions.
Expect the index to close higher 56.5% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 153/277 or 55.2% of the time.
     The prediction of the index closing lower has been right 48/94 or 51.1% 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.

Two symmetrical triangles appear on the chart. That's the good news.

Look at the one outlined in blue. That's the first one. Notice how it broke out downward just before the triangle's apex (yes, it's hard to see). Then the index reversed and made a strong push upward.

If we use that as a template for the red triangle, we should see a downward breakout on Thursday followed by a strong upward move going into the weekend. The bullish signal I mentioned in Wednesday's post has disappeared, leaving a bearish signal in place. That is another indicator of weakness coming.

I'm hoping it's very short term (a day or two).

$ $ $

I updated the performance statistics for double tops and bottoms (all types of each).

$ $ $

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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© 2018 ThePatternSite.com    Metric  Value  Diff  Close (within 10% of the high-low range for the day)? 
 Monthly S2  6,841.37    
 Weekly S2  7,046.45  205.09   
 Monthly S1  7,242.03  195.58   
 Weekly S1  7,344.58  102.54   
 Daily S2  7,518.03  173.45   
 Low  7,563.09  45.06   
 Weekly Pivot  7,572.16  9.07   Yes! The Weekly Pivot is close to the Low.
 Daily S1  7,580.36  8.20   Yes! The Daily S1 is close to the Weekly Pivot.
 61.8% Down from Intraday High  7,604.12  23.75   
 50% Down from Intraday High  7,616.79  12.67   
 Daily Pivot  7,625.43  8.64   Yes! The Daily Pivot is close to the 50% Down from Intraday High.
 38.2% Down from Intraday High  7,629.46  4.04   Yes! The 38.2% Down from Intraday High is close to the Daily Pivot.
 Close  7,642.70  13.24   
 Open  7,669.26  26.56   
 High  7,670.49  1.23   Yes! The High is close to the Open.
 Monthly Pivot  7,674.71  4.22   Yes! The Monthly Pivot is close to the High.
 Daily R1  7,687.76  13.06   
 Daily R2  7,732.83  45.06   
 Weekly R1  7,870.29  137.46   
 Monthly R1  8,075.37  205.09   
 Weekly R2  8,097.87  22.50   
 Monthly R2  8,508.05  410.17   

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.