As of 11/13/2019
  Indus: 27,784 +92.10 +0.3%  
  Trans: 10,843 -116.63 -1.1%  
  Utils: 844 +12.11 +1.5%  
  Nasdaq: 8,482 -3.99 0.0%  
  S&P 500: 3,094 +2.20 +0.1%  
YTD
 +19.1%  
 +18.2%  
 +18.4%  
 +27.8%  
 +23.4%  
  Targets    Overview: 10/31/2019  
  Up arrow28,200 or 27,100 by 12/01/2019
  Up arrow11,300 or 10,100 by 11/15/2019
  Up arrow870 or 800 by 12/01/2019
  Up arrow8,700 or 8,200 by 12/01/2019
  Up arrow3,150 or 2,950 by 11/15/2019
As of 11/13/2019
  Indus: 27,784 +92.10 +0.3%  
  Trans: 10,843 -116.63 -1.1%  
  Utils: 844 +12.11 +1.5%  
  Nasdaq: 8,482 -3.99 0.0%  
  S&P 500: 3,094 +2.20 +0.1%  
YTD
 +19.1%  
 +18.2%  
 +18.4%  
 +27.8%  
 +23.4%  
  Targets    Overview: 10/31/2019  
  Up arrow28,200 or 27,100 by 12/01/2019
  Up arrow11,300 or 10,100 by 11/15/2019
  Up arrow870 or 800 by 12/01/2019
  Up arrow8,700 or 8,200 by 12/01/2019
  Up arrow3,150 or 2,950 by 11/15/2019

Bulkowski's Extended V-Tops

 

Initial release on 7/18/2019.

Extended V-tops are chart patterns that are easy to spot after they have completed. They are inverted V-shaped price patterns on the chart but sport a small retrace on the right side.

An extended V top chart pattern appears
Extended V-top Chart Pattern

Extended V-tops: Important Bull Market Results

Overall performance rank (1 is best): 4 out of 53
Break even failure rate: 11%
Average decline: 19%
Pullback rate: 80%
Percentage meeting price target: 50%*

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

The above numbers are based on 1,250 perfect trades. See the glossary for definitions.

Extended V-tops: Identification Guidelines

I programmed my computer to find extended 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.

The following table shows some of the guidelines I used.

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.
ExtensionLook for price to pause on the way down. Often this pause will look like a flag, sloping slightly upward.
No SpikeI removed from consideration any extended V-top with an unusually long price bar as the top.
AnglePrice rises and reverses, forming an angle with the vertical. In some extended 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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Extended V-tops: Trading Tips

Trading an extended V-top is easier than trading a regular V-top. When price breaks out of the flag or pennant in the extended portion of the inverted V, take a position. Expect price to approach the price level of the start of the inverted V on the left. It may not reach the exact bottom, so be prepared to exit early.

Alternatively, you can wait for price to retrace lower than 38.2% and take a position then. Ride the stock lower.

Consult the associated figure on the right.

Trading TacticExplanation

Extended V-top chart pattern measure rule

The Measure Rule

BreakoutMeasure the height of the Extended V-top from B to A. When price on the way to C retraces 38.2% of AB, it constitutes a breakout. The 38.2% value is arbitrary.
Measure ruleThe price of A 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 extended V-top and divide it by the breakout price. If it's larger than 22.6%, then it's a tall pattern) patterns outperform short ones (21% versus 17% for tall versus short, respectively).
Yearly lowFor best performance, extended V-tops with breakouts within a third of the yearly low perform best.
Volume trendA receding volume trend results in the best post breakout performance.

Extended V-top: Example

Extended V top chart pattern example

The above figure shows an example of an extended V top chart pattern. Price begins the advance to the summit in early June and peaks near July. A black candle signals a reversal followed by the extension in a small congestion region that slants upward. Once the stock pierces the bottom of this region, price tumbles, approximating the angle at which price climbed to the V top.

The stock exceeded the measure rule target when it dropped below the start of the pattern (that is, dropped below about 45.50).

-- Thomas Bulkowski

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See Also

 

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My novels:      New                  Bumper's Story Head's Law

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

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