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 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 Big M

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 01/20/2017
19,827 94.85 0.5%
9,225 60.61 0.7%
658 0.48 0.1%
5,555 15.25 0.3%
2,271 7.62 0.3%
YTD
0.3%
2.0%
-0.2%
3.2%
1.5%
Tom's Targets    Overview: 01/18/2017
19,250 or 20,250 by 02/01/2017
8,800 or 9,500 by 02/01/2017
685 or 630 by 02/01/2017
5,700 or 5,400 by 02/01/2017
2,200 or 2,350 by 02/01/2017
Indus strength: None YTD
Mutt Losers: None YTD
Mutt Winners: None YTD

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.

The Big M chart pattern is a double top with tall sides. Price often approaches the low of the left side trend start (the launch point -- see the below picture) before recovering.

 

 

Big M chart pattern

Ideal example of a Big M

Important Bull Market Results

Overall performance rank (1 is best): Not Ranked
Break even failure rate: 11%
Average decline: 17%
Pullback rate: 63%
Percentage meeting price target: 57%

The above numbers are based on 1,313 perfect trades. See the glossary for definitions.

Big M Identification Guidelines

CharacteristicDiscussion
Price trendUpward leading to the pattern.
ShapeA big M shape with twin peaks and tall sides.
Reversal patternLook for a double top reversal pattern at the top of the big M.
Tall sidesThe double top should have twin peaks with highs less than 4% apart.
Drop between topsThe drop between the peaks of the double top is 10% to 20% or more.
Breakout confirmationThe pattern confirms as a valid one when price closes below the lowest valley between the double tops.

Top

Big M Trading Tips

Consult the associated figure on the right.

Trading TacticExplanation
Measure ruleCompute the height from the highest peak (A) to the lowest valley (B). Subtract the height from the confirmation point (B) to get a target (D). The result is the target price. The link to the left explains the measure rule. If you are lucky, price will bottom (D) at the launch price (E). For a closer target, use half the height in the above steps instead of the full height.
BreakoutDownward breakouts occur when price closes below the confirmation price (the lowest low in the Big M chart pattern, B in this case).
StallFor swing traders, sell short at the second double top peak (F) and ride price downward to confirmation of the double top (the low between the two peaks, B). If price rises above the highest peak in the pattern (A), consider exiting the position because price is likely to continue higher. If price confirms the double top, expect the decline to approach the left side low (E). It usually does not make it all the way down, but it will be close.
Position tradersWait for confirmation of the double top (price to close below B) before taking a position and be prepared to exit the position as the stock nears the price of the left side low (E).
Big M measure rule
The Measure Rule

Top

Big M chart pattern example

Big M Example

The figure on the right shows an example of an unusual Big M chart pattern. In this example, a triple top (ABC) replaces a double top (AB) in the Big M. In my trading, I allow many reversal patterns, such as ascending, descending or symmetrical triangles, triple tops, and so on, to replace the double top.

In this example, price breaks out when it closes below the horizontal red confirmation line then pulls back before resuming the downward march. Price at E, reaches the launch price of D almost exactly before staging a recovery. Notice the tall, straight-line run up from D to A and the slower decline from C to E.

-- Thomas Bulkowski

Top of page   More  

See Also

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. Beauty is in the eye of the beer holder.