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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

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Bulkowski's Extended V Tops and Bottoms

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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.

My book, Encyclopedia of Chart Patterns Second EditionEncyclopedia of Chart Patterns 2nd Edition book., pictured on the left, has 63 chart and event patterns including performance statistics.

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Extended V tops and extended V bottoms are chart patterns that are easy to spot after they have completed. They appear just like their names suggest, V-shaped or inverted V-shaped price patterns on the chart.

 


 

Extended V Tops

An extended V top chart pattern appears

Identification Guidelines

CharacteristicDiscussion
UptrendLook for price to make a straight-line run upward with few or no pauses, often fitting inside a channel (two parallel trendlines).
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.
DowntrendPrice trends down, usually at the mirror angle of the uptrend. If price climbed by 45 degrees, price will tumble following a 45 degree trend.
ExtensionThe extended V top is a variation of the V top. After price reverses at the top, price forms a flag or pennant pattern – a sideways price move that often swings upward against the downward price trend. Once the flag completes, price resumes the decline.
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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. For downward breakouts, 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.

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.

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Extended V Bottoms

An extended V bottom chart pattern appears

Identification Guidelines

Many of the identification guidelines are similar to the extended V top.

CharacteristicDiscussion
DowntrendLook for price to make a straight-line run downward with few or no pauses, often fitting inside a channel.
ReversalPrice at the bottom of the V will form a one-day reversal, island reversal, or tail, usually on heavy volume, perhaps gapping upward.
TrendlineAfter the reversal, price pierces a down-sloping trendline drawn along the price tops, confirming the trend change.
UptrendPrice trends up, usually at the mirror angle of the downtrend. If price dropped by 30 degrees, price will rise following a similar angle.
ExtensionThe extended V bottom is a variation on the V bottom. After price reverses at the bottom, price forms a flag or pennant pattern – a sideways price move that often swings downward against the prevailing upward price trend. Once the flag completes, price resumes the rise.
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Trading Tips

Trade an extended V bottom once price exits the flag or pennant. Expect price to approach the price level of the left side of the V (where the decline started).

Example

Extended V bottom chart pattern example

The above figure shows an example of an extended V bottom chart pattern. The decline into the pattern is unusually steep, meaning it cannot last long, and it doesn't. Price rebounds in a V-shape and then levels out, forming the extension. The extension appears on the chart as a descending triangle -- a flat base with down-sloping top. The breakout from this congestion pattern is upward and that means a powerful move up, retracing much of the drop leading into the V bottom.

-- Thomas Bulkowski

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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. Shin: A device for finding furniture in the dark.