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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 Failure Swings

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Market
Industrials (^DJI):
Transports (^DJT):
Utilities (^DJU):
Nasdaq (^IXIC):
S&P500 (^GSPC):
As of 10/20/2014
16,400 19.26 0.1%
8,228 80.00 1.0%
571 8.07 1.4%
4,316 57.63 1.4%
1,904 17.25 0.9%
YTD
-1.1%
11.2%
16.3%
3.3%
3.0%
Tom's Targets    Overview: 10/10/2014
16,800 or 15,800 by 11/01/2014
8,400 or 7,500 by 11/01/2014
580 or 540 by 11/01/2014
4,350 or 4,050 by 11/01/2014
1,950 or 1,800 by 11/01/2014

Written and copyright © 2008-2013 by Thomas N. Bulkowski. All rights reserved.

Failure swings are chart patterns that appear on indicator lines. They are small M or W shaped patterns that reliably signal short-term price turning points.

 

M-Shaped Failure Swings

M-shaped failure swings

Look for M-shaped failure swings that span the trigger line in the indicator. The chart to the right shows the Wilder relative strength index (RSI) with the failure swing spanning the 70 overbought signal line (the horizontal line at 70).

The stock begins its turn as the failure swing forms. Notice that the second peak of the failure swing doesn't rise above the first peak. It fails to swing higher, indicating a weakening technical picture and a potential trend change.

The example pictured is taken from an actual stock/indicator pair. Various shapes for the failure swing appear to the left in the chart. Some analysts argue that the failure swing must span the trigger line (70), but you can find numerous examples where that is not the case and yet price changes trend. Failure swings occur in indicators other than the RSI, too.

 

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W-Shaped Failure Swings

W-shaped failure swings

Look for W-shaped failure swings that span the trigger line in the indicator. The picture to the right shows the Wilder relative strength index ( RSI) with the failure swing spanning the oversold signal line (the horizontal line at 30).

The stock begins its turn as the failure swing forms. The example shown in the chart is taken from an actual stock/indicator pair. Various shapes for the failure swing appear to the left.

Some analysts argue that the failure swing must span the trigger line (30), but you can find numerous examples where that is not the case and yet price changes trend. Failure swings also occur in indicators other than the RSI.

-- Thomas Bulkowski

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Other Failure Swing Examples

See Also

Copyright © 2008-2013 by Thomas N. Bulkowski. All rights reserved. Cole's Law: Thinly sliced cabbage.