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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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Bulkowski's Price Mirrors

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Industrials (^DJI):
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As of 12/11/2017
24,386 56.87 0.2%
10,371 -31.68 -0.3%
763 4.90 0.6%
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24,600 or 23,500 by 12/15/2017
9,900 or 10,500 by 12/15/2017
800 or 750 by 12/15/2017
7,100 or 6,700 by 12/15/2017
2,725 or 2,575 by 12/15/2017

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.

My book, Trading BasicsTrading Basics: Evolution of a Trader book., discusses price mirrors starting on page 109 in the section titled, "24. Mirrors for Trend Prediction."

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This article discusses what price mirrors are and how to use them to predict price direction and likely turning points.

 

Using Mirrors for Price Prediction

Picture of Boeing on the weekly scale.

Imagine you own shares of Boeing, pictured on the weekly scale, to the left of the vertical yellow line. How can you predict where the stock will turn in the future?

The answer is to use price mirrors. This is just a fancy and shorter way of saying support and resistance.

Price peaks at A, drops down and then rises to form a second top at A, on the right side of the yellow line. Peak A is mirrored across the yellow line not in time but in price. In other words, the price at the left peak A is similar to that on the right peak. Of course, many of you will recognize the twin A peaks as a double top. It becomes an actual, valid double top when price closes below the low between the two peaks.

Look at the twin peaks B. Both are at a similar price level, with the B on the right a bit below that of the left peak. The pattern now becomes a complex head-and-shoulders top, one with two heads (As) and two shoulders (Bs).

The two C peaks do not have a reflection across the yellow line but they form their own mirrored pair.

Peaks E and D have their mirrors across the yellow line as well.

Valleys

Now let's look at the valleys. They form the same mirror pairs, don't they? Valleys Z and Z mirror each other in price. The Y on the right of the yellow line is lower than the one on the left. Two Ws appear, forming a small mirror, and the pair reflect across the yellow line by another pair of Ws on the right. Finally, the two Vs also reflect across the yellow line.

If you were to cover up the chart at the yellow line and just flop the left side onto the right, it would appear similar in shape. It would not be exact but similar. Sometimes, even the time between peaks and valleys is similar across some imaginary vertical yellow line.

These types of price mirrors can be a useful tool to help predict where price is going to pause when it begins retracing. Obviously, if the stock continued to climb to the right of the yellow line, we would not be having this discussion.

That also brings up a caution, too. While mirrors can prove not only useful but accurate as well, they have their limitations. For example, look at the left peaks D and C. The Z valley could mark the imaginary yellow line between these two. I show it as a thin, vertical green line. Peak e is mirrored by E. Valley y mirrors at Y. But price continues to rise after the first peak C. Again, mirrors only work when price is ready to reverse. In the second C peak, the stock still had more up-move left.

Mirrors work on all time scales. Just keep in mind that sometimes a peak on the left won't be mirrored by one on the right. In the absence of anything else, mirrors can help you guess how price will move in the future.

-- Thomas Bulkowski

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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. In case of atomic attack, the federal ruling against prayer in schools will be temporarily canceled.