Subscribe to RSS feeds Bulkowski Blog via RSS

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

Support this site! Clicking the links (below) takes you to Amazon.com. If you buy ANYTHING, they pay for the referral.

Picture of the Tears for Bumper.
Kindle
Nook
Picture of the head's law.
Kindle
Paperback
Nook
Chart Patterns: After the Buy
Getting Started in Chart Patterns, Second Edition book.
Trading Basics: Evolution of a Trader book.
Fundamental Analysis and Position Trading: Evolution of a Trader book.
Swing and Day Trading: Evolution of a Trader book.
Visual Guide to Chart Patterns book.
Encyclopedia of Chart Patterns 2nd Edition book.

Bulkowski's Cat's Ears

Class Elliott Wave Fundamentals Psychology Quiz Research Setups Software Tutorials More...
Busted
Patterns
Candles Chart
Patterns
Event
Patterns
Small Patterns
Market
Industrials (^DJI):
Transports (^DJT):
Utilities (^DJU):
Nasdaq (^IXIC):
S&P500 (^GSPC):
As of 05/26/2017
21,080 -2.67 0.0%
9,176 12.36 0.1%
720 -0.08 0.0%
6,210 4.93 0.1%
2,416 0.75 0.0%
YTD
6.7%
1.5%
9.2%
15.4%
7.9%
Tom's Targets    Overview: 05/15/2017
21,400 or 20,450 by 06/01/2017
9,500 or 8,700 by 06/01/2017
730 or 700 by 06/15/2017
6,350 or 6,000 by 06/01/2017
2,450 or 2,375 by 06/15/2017

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.

The Cat's Ears chart pattern described here is based on the writing of Giorgos E. Siligardos in the December 2012 issue of Technical Analysis of Stocks & Commodities magazine. In essence, the chart pattern is a double top in a downward price trend. Siligardos adds an RSI kicker to boost performance.

I have not tested the chart pattern, so I do not offer any performance results nor have I verified the identification guidelines.

The Cat's Ears chart pattern
The Cat's Ears Pattern (in red)

 

Important Bull Market Results

Overall performance rank (1 is best): ?
Break even failure rate: ?
Average decline: ?
Pullback rate: ?
Percentage meeting price target: ?

This pattern has not yet been tested. See the glossary for definitions.

Cat's Ears Identification Guidelines

CharacteristicDiscussion
DeclineLook for the stock to make a severe decline. This is phase 1 in the above figure. "Severe decline" has not been defined by the author.
PauseIn step 2, the decline stops and price moves essentially horizontally.
Left EarThe left ear forms. This is phase 3 in the above chart.
ScalpPrice pauses again between the two ears by moving sideways. This is step 4
Right EarThe right ear forms. See step 5.
Scalp Line BreakThe scalp line is the lowest price in the pattern (often set by the drop between the two ears). When price closes below the pattern's low, it confirms the pattern as valid.
VolumeThe typical volume pattern shows high volume at the tops of the ears and breaking of the scalp line (the breakout). Low volume can occur in phase 4 (pause between the two ears). Pullbacks often occur on low volume. Spikes in volume can appear at the start of phases 2, 3, 4, and 6.
DurationThe length of the cat's ears is between 10 days and 2 months (60 days).

Top

Cat's Ears Trading Tips

Trading TacticExplanation
Measure RuleTake the height of the pattern from highest peak (A) to lowest valley (B) and subtract it from the value of the lowest valley (B) to get the target C. See the figure on the right
RSIThe 14-period relative strength index (RSI) during the pattern remains below 65. The RSI value on the left ear is often lower than on the right.
RSI Above 65RSI values above 65 during formation of the pattern means the cat's ears is less bearish.
BearishIf the price of the left ear (peak) is above that of the right ear, the pattern is more likely to reach the measure rule target. An example of this scenario is shown on the right.
The Cat's Ears chart pattern measure rule
The Measure Rule

Top

Cat's Ears Variations

The Cats Ears chart pattern variations

Siligardos has identified six variation of the basic Cat's Ears pattern, which I show in the accompanying chart.

Image 1: There is no phase 2, which is the horizontal movement before formation of the left ear. The arrow points to the missing phase 2.

Image 2: The left ear is below the peak of the right ear, noted by the two red circles.

Image 3: The left ear is above the peak of the right one, noted by the two red circles.

Image 4: The scalp line is high (see arrow).

Image 5: The scalp line is low (see arrow).

Image 6: Phase 2 (the horizontal movement leading to formation of the left ear) is volatile (see arrow).

Top

The Cats Ears chart pattern example

Cat's Ears Example

Pictured is an example of the cat's ears chart pattern on the daily scale of the Dow Jones Industrials in early 2009.

The pattern begins with a strong thrust downward (1). Price moves horizontally briefly in phase 2 (2) followed by the rise up to the left ear (3).

Phase 4 sees the index drop to the cat's scalp (4) and returns to form a lower right ear at 5.

The breakout occurs when price tumbles below the scalp line (line A) and makes another strong move down (6).

-- Thomas Bulkowski

Top 

See Also

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. Members of the NRA shoot themselves in the foot.