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 Bumper.
Kindle
Paperback
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 Trading Cycles

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 12/11/2017
24,386 56.87 0.2%
10,371 -31.68 -0.3%
763 4.90 0.6%
6,875 35.00 0.5%
2,660 8.49 0.3%
YTD
23.4%
14.7%
15.6%
27.7%
18.8%
Tom's Targets    Overview: 11/30/2017
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.

This article discusses how to use cycles to help time the entry and exit of trades, focusing on day trading.

 

A chart of a stock for the last 10 days.

Shown is a stock chart using a 10 day look back on the 5 minute scale, courtesy of bigcharts.com. I drew vertical blue lines to separate the days more clearly for this presentation.

Pretend you are interested in buying the stock at a good price. Thus, you will be looking for cycle lows: common times when price makes a low. Knowing when price is about to make a low gives you an edge. You can pull the trigger (buy) with more confidence. I show red circles highlighting the locations when the stock made a low near the same time.

The first five circles bottom about 1.5 to 2 hours into the session (and you should be able to pick out the times on your intraday chart better than this one by zooming into the individual day) and the two circles on the right bottom later.

Trading Cycles: The Details

For end-of day traders like me, use the cycle information to help locate times when you should focus on the stock instead of sitting and watching it all day. Cycles can help you determine when it will be a good time to buy (look for cycles among the valleys) or to sell (cycles among the peaks). I have used this technique several times for entries and it works for both end-of-day traders and can also help day traders plan when price is going the reverse, based on prior cycles.

Since each stock will show different cycle patterns, you will have to do your own analysis. Do not depend on every stock making a low 1.5 to 2 hours into the trading day. This is just an example. The low you pick may not be the lowest low of the day, but one where you can get in at a good price.

When you look at your intraday chart as the expected time of reversal nears, if the stock is trending higher then forget it. The cycle is broken and it will not work this day. But, if the stock is trending downward, then it could reverse near the expected time. Look for underlying support or the stock to form a bottom, perhaps move horizontally for several price bars.

The 10-day chart will tell you how typical reversals look, either V-shaped or more flat, wider looking (an Adam bottom versus an Eve bottom, if you know what those are). If price looks to be turning near the cycle low time, then consider buying. The above chart, for example, has V-shaped bottoms at the common reversal times.

Top

Trading Cycles: Shopping List

The following is a synopsis of what to look for when using cycles.

  1. Begin with the 10-day chart, if available.
  2. Find common times in which price bottoms.
  3. Look at the shape of price as it reverses from down to up. Is the reversal V-shaped or flat?
  4. Switch to the real-time chart (the chart you use to trade) and assume the reversal time is now.
  5. If price is trending upward, the cycle is broken, so look elsewhere for another trading opportunity.
  6. If price is dropping, look for underlying support that would cause price to turn.
  7. If price makes the same reversal pattern that you identified using the 10-day chart (that is, V-shaped or flat), then consider buying.
  8. Do not buy the stock just because the reversal time is now. Price could continue lower. Wait for it to reach underlying support and begin to turn.

-- Thomas Bulkowski

Top 

Trading Cycles: Other Examples

See Also

  • Best buy days. Which day of the week is the best one to buy or sell?
  • Best buy months. Can buying at the end of the worst performing month and selling at the best performing be profitable?
  • Holidays. Does the market rise or fall before and after holidays? Answer: Fall.
  • Market cap. Chart patterns in small cap stocks outperform.
  • Seasonality. What are the best months to buy and sell stocks?
  • 12 Month moving average. Use a moving average to time the market.

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. Milli-Helen: A unit of beauty sufficient to launch one ship.