As of 10/23/2020
  Indus: 28,336 -28.09 -0.1%  
  Trans: 11,880 +131.58 +1.1%  
  Utils: 894 +2.40 +0.3%  
  Nasdaq: 11,548 +42.27 +0.4%  
  S&P 500: 3,465 +11.90 +0.3%  
YTD
-0.7%  
 +9.0%  
 +1.7%  
 +28.7%  
 +7.3%  
  Targets    Overview: 09/29/2020  
  Up arrow29,300 or 27,400 by 11/01/2020
  Up arrow12,000 or 11,000 by 11/01/2020
  Up arrow915 or 840 by 11/01/2020
  Up arrow12,800 or 11,300 by 11/01/2020
  Up arrow3,700 or 3,400 by 11/01/2020
CPI (updated daily): Arrows on 9/25/20
As of 10/23/2020
  Indus: 28,336 -28.09 -0.1%  
  Trans: 11,880 +131.58 +1.1%  
  Utils: 894 +2.40 +0.3%  
  Nasdaq: 11,548 +42.27 +0.4%  
  S&P 500: 3,465 +11.90 +0.3%  
YTD
-0.7%  
 +9.0%  
 +1.7%  
 +28.7%  
 +7.3%  
  Targets    Overview: 09/29/2020  
  Up arrow29,300 or 27,400 by 11/01/2020
  Up arrow12,000 or 11,000 by 11/01/2020
  Up arrow915 or 840 by 11/01/2020
  Up arrow12,800 or 11,300 by 11/01/2020
  Up arrow3,700 or 3,400 by 11/01/2020
CPI (updated daily): Arrows on 9/25/20

Bulkowski on the Bullish Carl V

 

Initial release 10/12/2020.

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.

Bullish Carl V: Bull Market Results

Overall performance rank (1 is best): not ranked*
Break even failure rate: 18%*
Average rise: 41%*
Throwback rate: 67%*
Percentage meeting price target: 62% (pattern height added to the low at D)

The above numbers are based on 2,529 perfect trades in bull markets. See the glossary for definitions.

* These numbers use my traditional gauge of the rise from the breakout price (the top of the chart pattern) to ultimate high. Using that approach, the pattern would place 23rd out of 40 for performance where 1 is best. However, that's not how Vanhaesendonck trades the chart pattern. He takes a position just after bottom D forms and rides price higher, often exiting at a target price, not the ultimate high. Using his approach, price reaches the target 62% of the time in the stock market (he trades currencies).

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 62% 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 4,179 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 62% 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 93% of the time. The other 7% means price drops and doesn't make it up to the price of B. Thirty-five percent of the time price will rise to reach A and 15% 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 50% of the time. That's 30% 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 34% 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. 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 better 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. Analysis of the data suggests a 20% rise would work slightly better. You could also use a moving average (a close above a short moving average, like 5 or 9 price bars or another entry method.

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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 a 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).

-- Thomas Bulkowski

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See Also

 

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My novels:  Bumper's Story Head's Law

Chart Patterns: After the Buy Getting Started in Chart Patterns, Second Edition Trading Basics Fundamental Analysis and Position Trading Swing and Day Trading Visual Guide to Chart Patterns Encyclopedia of Candlestick Charts Encyclopedia of Chart Patterns 2nd Edition Trading Classic Chart Patterns

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