As of 07/19/2019
  Industrials: 27,154 -68.77 -0.3%  
  Transports: 10,604 +66.69 +0.6%  
  Utilities: 820 -11.25 -1.4%  
  Nasdaq: 8,146 -60.75 -0.7%  
  S&P 500: 2,977 -18.50 -0.6%  
YTD
 +16.4%  
 +15.6%  
 +15.0%  
 +22.8%  
 +18.7%  
  Tom's Targets    Overview: 07/12/2019  
  Down arrow26,500 or 28,000 by 08/01/2019
  Down arrow10,000 or 11,000 by 08/01/2019
  Up arrow850 or 800 by 08/01/2019
  Down arrow7,950 or 8,500 by 08/01/2019
  Down arrow2,900 or 3,075 by 08/01/2019
As of 07/19/2019
  Industrials: 27,154 -68.77 -0.3%  
  Transports: 10,604 +66.69 +0.6%  
  Utilities: 820 -11.25 -1.4%  
  Nasdaq: 8,146 -60.75 -0.7%  
  S&P 500: 2,977 -18.50 -0.6%  
YTD
 +16.4%  
 +15.6%  
 +15.0%  
 +22.8%  
 +18.7%  
  Tom's Targets    Overview: 07/12/2019  
  Down arrow26,500 or 28,000 by 08/01/2019
  Down arrow10,000 or 11,000 by 08/01/2019
  Up arrow850 or 800 by 08/01/2019
  Down arrow7,950 or 8,500 by 08/01/2019
  Down arrow2,900 or 3,075 by 08/01/2019

Bulkowski's V-Tops

 

Initial release on 7/11/2019.

V-tops are chart patterns that are easy to spot after they have completed. They are inverted V-shaped price patterns on the chart.

V-top chart pattern
V-top chart pattern

V-Tops: Important Bull Market Results

Overall performance rank (1 is best): not available
Break even failure rate: 29%
Average decline: 15%
Pullback rate: 56%
Percentage meeting price target: 37%*

The price target is the bottom of the start of the pattern.

The above numbers are based on 2,416 perfect trades. See the glossary for definitions.

V-Tops: Identification Guidelines

I programmed my computer to find V-tops because to do it any other way would be unfair. I'd pick the patterns which worked and would not see those which didn't.

Some of the guidelines shown in the table reflect that.

CharacteristicDiscussion
UptrendLook for price to make a straight-line run upward with few or no pauses, often fitting inside a channel (two parallel trendlines).
WidthAt least 3 weeks to 3 months wide.
ReversalPrice at the top of the inverted V will form a one-day reversal, island reversal, or tail, usually on heavy volume.
TrendlineAfter the reversal, price pierces an up-sloping trendline drawn along the price lows, confirming the trend change. This is not a requirement, but an observation.
RetracePrice on the right side must retrace at least 38.2% of the left side.
BreakoutWhen price retraces 38.2% of the left side, then that's the breakout.
No PauseThere should be no pause between the V-top and the breakout (38.2% retrace value). Otherwise, it's an extended V-top.
No SpikeI removed from consideration any V-top with a single long price bar as the top.
AnglePrice rises and reverses, forming an angle with the vertical. In some V-tops, the left angle will mirror the right one. For example, if price climbed by 30 degrees, price might drop following a similar angle.

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V-Tops: Trading Tips

Trading V-tops is not an easy proposition. Draw a trendline along the bottoms as price rises in the first part of the V. When price pierces the trendline, then check for any fundamental news that would account for a reversal. Check other stocks in the same industry to see how they are behaving. Sometimes, one stock will pull the industry down with it.

If you find no fundamental news and other stocks in the industry look good, then a lasting turn may not be at hand. Wait for 3 days and if price continues declining, then sell. Of course, you can also sell once price closes below the trendline.

You can calculate a 38.2% retrace of the move up on the left side of the pattern. If price closes below the computed value, then consider selling.

Consult the associated figure on the right.

Trading TacticExplanation

V top chart pattern measure rule

The Measure Rule

BreakoutMeasure the height of the V-top from A to B. When price on the way to C retraces 38.2% of AB, it constitutes a breakout. The 38.2% value is arbitrary.
Measure ruleB is the measure rule target.
Price trendIf price trends down into the pattern, then expect better performance (See the trend start).
Tall patternsTall (take the height of the V-top and divide it by the breakout price. If it's larger than 25.3%, then it's a tall pattern) patterns substantially outperform short ones (18% versus 12% for tall versus short, respectively).
Yearly lowFor best performance, V-tops with breakouts within a third of the yearly low perform best.
Volume trendA rising volume trend results in the best post breakout performance.

V-Top: Example

V-top chart pattern example

This is a good example of a V-top chart pattern. Price moves up in a straight-line run then drops almost as quickly as it ascended. The difficulty with V-top chart patterns is that by the time you recognize it, the move might be over. Plus,the drop might not amount to much anyway.

-- Thomas Bulkowski

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See Also

Support this site! Clicking any of the books (below) takes you to Amazon.com. If you buy ANYTHING while there, they pay for the referral.
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 Bumper's Story Head's Law
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