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Bulkowski's Predict Breakout Direction

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As of 04/23/2019
  Industrials: 26,656 +145.34 +0.5%  
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  Tom's Targets    Overview: 04/12/2019  
  Up arrow26,900 or 25,500 by 05/01/2019
  Up arrow11,200 or 10,500 by 05/01/2019
  Up arrow825 or 755 by 05/01/2019
  Up arrow8,250 or 7,850 by 05/15/2019
  Up arrow2,975 or 2,800 by 05/01/2019
As of 04/23/2019
  Industrials: 26,656 +145.34 +0.5%  
  Transports: 11,003 +26.03 +0.2%  
  Utilities: 773 +1.99 +0.3%  
  Nasdaq: 8,121 +105.55 +1.3%  
  S&P 500: 2,934 +25.71 +0.9%  
YTD
 +14.3%  
 +20.0%  
 +8.4%  
 +22.4%  
 +17.0%  
  Tom's Targets    Overview: 04/12/2019  
  Up arrow26,900 or 25,500 by 05/01/2019
  Up arrow11,200 or 10,500 by 05/01/2019
  Up arrow825 or 755 by 05/01/2019
  Up arrow8,250 or 7,850 by 05/15/2019
  Up arrow2,975 or 2,800 by 05/01/2019

Written by and copyright © 2005-2019 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.

My book, Getting Started in Chart Patterns, Second EditionGetting Started in Chart Patterns, Second Edition book., pictured on the left, discusses partial rises and declines starting on page 207.

If you click on this link and then buy the book (or anything) at Amazon.com, the referral will help support this site. Thanks. -- Tom Bulkowski

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This article discusses how to predict the breakout direction from some chart patterns.

Picture of Apple computer (AAPL) on the daily scale.

With some chart patterns, determining the breakout direction is easier than with other chart patterns. Let's take a look at broadening tops.

The chart of Apple Computer (AAPL) shows a broadening top chart pattern. There are a number of identification guidelines that help with identification. They are:

  1. Price should trend up leading to the start of the pattern (if it trends downward, it's a broadening bottom).
  2. The shape of the pattern should resemble a megaphone with the smaller end toward the left, wider to the right.
  3. Price follows two diverging trendlines, one along the peaks and another along the valleys.
  4. Price should touch each trendline at least twice.
  5. Look for partial rises and declines.

The chart shows a partial decline. Once the broadening top has passed the identification guidelines (meaning only begin looking for a partial rise or decline after point 2 in this case, since bottoms 4, 5, and 6 were made earlier) then watch for price to drop from the top trendline but not make it down to the lower trendline. In broadening tops, these partial decline correctly predict an immediate upward breakout 72% of the time.

In this example, the breakout was not immediate as the partial decline predicted, even though it correctly signaled an upward breakout. It took another move down before price recovered and broke out upward.

You can review the links for more information on these pre-breakout features. You will find partial rises and declines helpful in all varieties of broadening patterns as well as rectangles and even triangles.

-- Thomas Bulkowski

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Written by and copyright © 2005-2019 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. I may not be totally perfect, but parts of me are excellent!