As of 01/26/2021
  Indus: 30,937 -22.96 -0.1%  
  Trans: 12,643 -206.55 -1.6%  
  Utils: 864 -7.76 -0.9%  
  Nasdaq: 13,626 -9.93 -0.1%  
  S&P 500: 3,850 -5.74 -0.1%  
YTD
 +1.1%  
 +1.1%  
0.0%  
 +5.7%  
 +2.5%  
  Targets    Overview: 01/13/2021  
  Up arrow32,000 or 29,600 by 02/01/2021
  Up arrow13,500 or 12,300 by 02/01/2021
  Up arrow890 or 800 by 02/01/2021
  Up arrow13,750 or 12,700 by 02/01/2021
  Up arrow3,900 or 3,625 by 02/01/2021
CPI (updated daily): Arrows on 1/25/21
As of 01/26/2021
  Indus: 30,937 -22.96 -0.1%  
  Trans: 12,643 -206.55 -1.6%  
  Utils: 864 -7.76 -0.9%  
  Nasdaq: 13,626 -9.93 -0.1%  
  S&P 500: 3,850 -5.74 -0.1%  
YTD
 +1.1%  
 +1.1%  
0.0%  
 +5.7%  
 +2.5%  
  Targets    Overview: 01/13/2021  
  Up arrow32,000 or 29,600 by 02/01/2021
  Up arrow13,500 or 12,300 by 02/01/2021
  Up arrow890 or 800 by 02/01/2021
  Up arrow13,750 or 12,700 by 02/01/2021
  Up arrow3,900 or 3,625 by 02/01/2021
CPI (updated daily): Arrows on 1/25/21

Bulkowski on the Bullish Carl V

 

Initial release: 10/12/2020. Revised and updated the statistics: 11/4/2020.

Bullish Carl V: Overview

The bullish Carl V is named after its discoverer, Carl Vanhaesendonck. Mr. Vanhaesendonck lives in Belgium and spent the last two decades trading currencies, futures, and stocks (via CFD, part-time) as day-trader or occasional swing trader, while maintaining a career as global business development executive in the medical IT field. Now that he's retired, he's trading almost full time.

He wrote in an email, "I discovered that pattern probably 4-5 years ago, almost noting distractedly the [repetitive] outcome, first thinking 'that was just my imagination.' " He started trading the pattern in earnest this year [2020] and shared his discovery with me. I researched the pattern and below are some of my findings supported by the gracious help of Mr. Vanhaesendonck.

Mr. Vanhaesendonck trades this pattern in the currency market (mostly) and often for day trading. He writes, "I have been able to make money with it." My analysis used only stocks on the daily scale in bull markets, so my theoretical results are different from his actual trading experience. His trading technique is worth considering. It might give you ideas about how to improve your own trading methods.

Let me express my thanks to Carl Vanhaesendonck for sharing his pattern and trading knowledge with me.

Bullish Carl V: Bull Market Results

Overall performance rank (1 is best): not ranked*
Break even failure rate: 1%*
Average rise: 63%*
Throwback rate: 65%
Percentage meeting price target: 57%* (pattern height added to the low at D)

The above numbers are based on 1,379 perfect trades in bull markets. See the glossary for definitions.

* These numbers measure from the low at point D, not from an upward breakout (a close above the top of the chart pattern) to the ultimate high.

Carl V chart pattern
Bullish Carl V

 

Bullish Carl V: Identification Guidelines

ideal bullish Carl V chart pattern

The image on the right represents what an ideal bullish Carl V chart pattern looks like. Consider the portion to the left of the black vertical divider.

The bullish Carl V (turns XABCD) appears similar to a broadening bottom in that a line joining AC slopes upward, and a line joining BD slopes downward. Point X is different, though. It's off in the boonies and not part of a broadening pattern. The five turns remind me of Fibonacci patterns except that you don't have to spend time calculating the Fibonacci turns.

The right portion of the figure shows what the chart pattern would look like in the bush. Price makes a major top at E, drops down into the chart pattern so that the Carl V acts as a reversal of the EX downtrend. Then price forms the bullish Carl V and turns upward at D. The rise from D to F is the same length or longer than the XA rise. I show that with the red line DF. In this example, it's the same length as XA. Tests show price reaches target F 57% of the time. That's good but not great.

When the pattern acts as a continuation of the uptrend, peak E is below X (or E becomes a major bottom). Bullish Carl Vs which act as reversals or continuations have the same performance. However, those patterns acting as reversals shows a one percentage point lower failure rate (16% versus 17%).

CharacteristicDiscussion
ShapeLook for a minor low (X) which leads to a broadening pattern where a second peak is above the first (C is above A), and a second valley is below the first (D is below B).
Turn XIf price trends down into the minor low at X, the best performance results when the trend begins below the price of C (E is below C, like that shown). In the figure, point E should be a major turn (I used the highest peak in about a month of price action, 10 price bars on either side of the peak to qualify it as 'major').
Turn ATurn A is above X. It's a minor high, the highest peak between X and A.
Turn BValley B is below the price of A but above X. There must not be a valley below B on the way from A to B.
Turn CTurn C is priced above A and it's the highest peak between A and C.
Turn DTurn D is below the price of B but above X. Again, no valley should be lower than D on the drop from C to D.

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Bullish Carl V: Trading Tips

The following is what I learned from crunching the numbers using data from July 1996 to September 2020, finding 2,474 chart patterns in both bull and bear markets, with up and down breakouts. The results which follow apply only to bull markets where the pattern has an upward breakout.

Trading TacticExplanation Carl V chart pattern
Measure Rule
Measure ruleReference the figure to the right. Compute the height of the chart pattern from the highest peak (C) to the lowest valley (X). Add the result to the low price of turn D. Price reaches target F 57% of the time.
Turn XIf a major peak precedes turn X (shown as peak E) then look for the peak E to be below C. In that configuration, the average rise changes from 41% to 46% but failures tick up from 15% to 17%.
Reversals vs continuationsIf the Carl V acts as a reversal of the downward price trend (like that shown as the drop from E to X), gains rise from 39% to 44% and failures drop from 20% to 16%.
Big moveFor reversals, the median drop from E to X is 11% (shown). For continuations, the median rise from E to X is 6% (not shown). If the move for either reversals or continuations is more than their respective median, then expect a larger gain and fewer failures.
Long XAIf the move from X to A is longer than the drop from C to D, gains are higher and failures are fewer.Carl V chart pattern
Downward Breakouts
Downward breakoutsSee the Downward Breakouts figure to the right. When price breaks out downward from the pattern, I found that it rises from D to the price of B 94% of the time. The other 7% means price drops and doesn't make it up to the price of B. Forty-one percent of the time price will rise to reach A, and 10% will reach C before dropping all the way down to close below the price of X. I show those numbers following the DGH path.
Stop locationPlacing a stop a penny below D means you'll be stopped out 56% of the time. That's 35% which breakout downward and the rest from upward breakouts which drop below D but don't close below X. The safest location for a stop is a penny below X. If you place it there, you'll be stopped out 40% of the time. That's a large failure rate. Before you place a stop below X, be sure you measure the potential loss to see if it's reasonable compared to the potential profit.
EntryThe challenge to trading this chart pattern is to determine when turn D is in place. My computer program used 3 higher price bars past D to qualify D as a bottom (which I call an Above 3 pattern). You can use something similar (If price doesn't make a low below D for 3 price bars, then you've found D). Vanhaesendonck uses a different approach. He takes 25% of the XC rise and adds that to the low price at D. A buy stop placed at that target will get you in.

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Bullish Carl V: How Vanhaesendonck Trades

Carl V chart pattern example

Reference the chart on the right but note it's not drawn to scale. The black line which turns red is price. The bullish Carl V is XABCD. The horizontal blue lines are 25% to 100% of the XC distance added to the low at D.

Here's what Vanhaesendonck says about how he trades his chart pattern (edited for clarity).

My trading rules: when all those conditions are met [the identification guidelines], I draw an XCD swing and project the same XC distance [height], but from D. I have divided this projection into four equal parts: 25%, 50%, 75%, and 100%.
  1. As soon as price slightly exceeds the 25% value, I enter long (my stop is a couple of ticks below 'D')
  2. When price reaches 50%, I put the trade in break-even [by raising the stop to just above the entry price]
  3. When price reaches 100%, I sell half of the position and keep the rest using a trailing stop (but often, in a day-trade, I exit it all at 100% if it gets there).

Vanhaesendonck adds, "Trade management changes once (if) it gets to the 50% mark: It [a stop] would be either break-even (in this case the 25% mark where I entered) or the last pivot (by pivot I mean just a lower high and a lower low in a rising trend. It can be a couple of price bars before the trend resumes) if it exists and at the condition it is above the 25% mark. I would keep the last visible pivot [closest] as price continues up: if there are new pivots higher, I would always take the most recent one.

Carl V chart pattern example

"Honestly, I rarely use the break-even stop once price goes beyond 50%: I have seen too often profit evaporate while, with the "last pivot low" thing, I at least get paid for my trade. On a day trade, if it is late in the day and I intend to quit my desk and price is above the 50% target, I will just take my profit and call it a day."

For the exit, look at the chart on the right. He buys when price reaches the 25% line. In this example, price continues to rise above 50% but then retraces for a day. That's the pivot, a day when price makes a lower low and lower high before resuming the uptrend.

In this example, he raises his stop from the breakeven price (near the 25% line) to a tick below the pivot low. When price drops to the pivot low (minus a tick), the stock's triggered and he's cashed out.

If the trade goes well, here's what he does.

When the position can be scaled out in several lots, there is a much better objective than the 100% [price rises far enough to reach the measure rule target of XC + D]. What I do, when I am lucky enough, is to exit only a part of my position at 100%, and exit all the rest at a 200% projection, but calculated another way: the price difference between X and C added to C [the top of the chart pattern, not D], so the new target is 2 x XC. Very often, that works.

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Carl V chart pattern example

Bullish Carl V Example: Amazon

This is a chart of Amazon.com (AMZN) on the daily scale.

Price forms the Carl V at XABCD, as shown.

Notice that price trends into X from the bottom so this Carl V acts as a continuation of the upward trend. That is, price enters the pattern (X) from the bottom and exits out the top (at E).

Turn A is above X. Turn B is below A and above X. Turn C is above A, and turn D is below B but above X. That's how it should be. In other words, this Carl V obeys the identification guidelines for a proper Carl V chart pattern.

The breakout occurs when price closes above the top of the chart pattern (C) which happens at E. Price throws back to F before resuming the upward move. Throwbacks happen 67% of the time, so expect one.

After price resumes climbing after F, it reaches the target as shown. The target is the XC height added to the low at D.

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Bullish Carl V Example: Baxter International

Carl V chart pattern example

Here's another example of a Carl V, also on the daily scale.

In this example, turn X is at the bottom of a downward price trend. Thus, this Carl V acts as a reversal of that downtrend. Contrast that with the prior chart which acted as a continuation pattern.

Price obeys the identification guidelines already discussed. I show the five turns as XABCD of the Carl V.

At E, price breaks out upward, throws back to F, and then resumes the upward climb to reach the measure rule target (shown).

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Carl V chart pattern example

Bullish Carl V Example: Cisco Systems

The last example is a failure in the traditional sense of the way I look at most chart patterns. I'll explain that in a moment.

In this case, the stock (daily scale) is also in a downtrend going into turn X. The downtrend from peak G isn't long but G qualifies as a major peak (that is, no higher peak 10 price bars before to 10 price bars after peak G).

So this Carl V acts as a reversal of that short downtrend.

Price rises and falls forming the five turns of the bullish Carl V pattern (XABCD).

At E, price almost closes above the top of the pattern (above C), but doesn't. The high price at E looks to be above C, but it didn't close higher. This bullish Carl V breaks out downward when it closes below the bottom of the pattern at F.

This Carl V is a failure because it didn't breakout upward. However, that's misleading.

If you were to buy the stock soon after turn D, you could ride price higher and exit when it ran into overhead resistance near E. So even though this Carl V failed by traditional measures, it was still profitable for nimble swing traders. And that might be the big secret to the bullish Carl V: Enter as near to turn D as you can and ride price higher. Expect resistance at the top of the chart pattern.

In this case, Vanhaesendonck would buy into the stock 25% of the XC height above D. The high at C is at 58.15, the low at X is 51.49 for a height of 6.66. Twenty-five percent of 6.66 is 1.67. Added to the low at D (54.03) gives an entry price of 54.03 + 1.67 or 55.70, shown as the green line.

The stock formed a pivot when it struggled to continue higher after E. He'd place a stop a penny below the pivot low, 56.89. That stop would trigger as price dropped on the way to F, leaving him with a small profit ($1.19 a share).

Bullish Carl V: Entry and Exit Testing

I ran the bullish Carl V pattern through various tests, trying to find the best entry mechanism, which I show in Table 1. The results that follow are from stocks on the daily scale in bull markets only.

Bullish Carl V: Entry Tests

Table 1 Summary: Table 1 shows that the closer you buy to valley D, the more you can make. The model I use finds an Above 3 chart pattern (a valley followed by three price bars whose lows are above the valley) for turn D. Should price rise to the associated entry price of 10% to 35% on any of those days, the trade begins. Thus, the program knows there's a turn at D and an entry signal may happen even though a trader would be guessing that turn D is in place. You can use whatever mechanism you wish to locate or identify turn D (intuition, pivots, and so on). For comparison purposes I think the test is fine.

The payoff ratio is the ratio of average winning trade to the average losing trade. The mathematical expectancy according to Vanhaesendonck is 100 x ((Winner % x payoff ratio) - Loser %). If a system has a payoff ratio of 70%, and wins 60% of the time, the ME would be 100 x (.60 x .70) - .40) or 41.6. He looks for values above 30 for stable systems.

The tests follow the rules described above for how Vanhaesendonck trades.

Table 1: Test Results for Entry
Test Description% WinProfit/LossPayoff
Ratio
Mathematical
Expectancy
Buy at 10% up47%$1.17350%113
Buy at 15% up45%$1.00317%89
Buy at 20% up47%$.72225%53
Buy at 25% up49%$.55174%35
Buy at 30% up51%$.32133%19
Buy at 35% up55%$.27110%15

Table note: The tests uses various percentages of the XC height up from D as the entry price (10% to 35%).

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Bullish Carl V: Exit Tests

Here's the results of how the entry mechanisms worked with Vanhaesendonck's trading rules. The higher up the from D, the fewer failures you'll see, but the less profit you'll make.

Table 2 Summary: The tests reveal that the farther up from D you enter, the more likely price will reach the 50% target. Few stocks will reach the 100% target and almost none will reach the exit signal at 200% of the XC height added to the low at D.

Vanhaesendonck uses the 25% entry. When price rises 25% of the XC height above the low at D, he buys the stock and places a stop loss order below D.

The table shows ("25% Up" column) that for the stocks I tested on the daily scale and in bull markets, 65% of trades will climb to the 50% value. That's where he raises the stop to breakeven. Just 20% of trades will make it to the 100% target, and just 4% rise to the 200% target.

Most of the time (42%), trades will be stopped out when price drops below a pivot. The others will be stopped out when price drops below D (25%) or will hit the breakeven stop (29%). The remainder of the trades (4%) reach the 200% sell target.

Table 2: Test Results for Exit
Test Description10% Up15% Up20% Up25% Up30% Up35% Up
Percentage rise to 50% of XC height above D61%61%62%65%68%74%
Percentage rise to 100% of XC height above D22%20%20%20%19%18%
Sold at 200% of XC height (exit target)5%5%4%4%4%4%
Stopped out below D33%31%28%25%21%16%
Pivot stop50%47%44%42%39%34%
Breakeven stop12%18%23%29%36%46%

Table notes

The "Percentage rise to 50% of XC Height above D" tells how many trades climbed to the 50% target (that's 50% of the XC height added to the low price at D).
"Percentage rise to 100% of XC height above D" This is the same as the prior row except the target is the pattern's height added to D.
"Sold at 200% of XC height (exit target)." The 200% height target is the exit signal. As the table shows, few stocks see price rise that far before they are taken out by a pivot.
"Stopped out below D." This tells how often price reverses and drops below D, forcing an exit from the trade.
"Pivot stop." This shows how many trades are stopped out by a pivot.
"Breakeven stop." If price rises to the 50% target, the stop is moved to breakeven. The table shows how many get stopped out when price returns to breakeven stop.

-- Thomas Bulkowski

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See Also

 

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