Bulkowski's Horn Bottoms
S&P 500 (^GSPC):
As of 05/24/2013
15,303 8.60 0.1%
6,396 -34.09 -0.5%
499 -5.30 -1.1%
3,459 -0.28 0.0%
1,650 -0.91 -0.1%
or 14,850 by 06/01/2013
or 6,200 by 06/01/2013
or 490 by 06/01/2013
or 3,300 by 06/01/2013
or 1,600 by 06/01/2013
Written by and copyright © 2005-2013 by Thomas N. Bulkowski. All rights reserved.
For more information on this pattern, read
Encyclopedia of Chart Patterns, Second Edition,
pictured on the right, pages 115 to 131. That chapter gives a complete review of the chart pattern, including tour, identification guidelines, focus on failures, performance statistics, trading tactics, and sample trade. Below is just a sliver of the information contained in the book.
Horn bottoms are H-shaped chart patterns that appear on all time scales, but the weekly charts
show better performance over those appearing on the dailies. Performance is best in a bear market. Discovered by
Thomas Bulkowski in 1998.
Important Bull Market Results for Horn Bottoms
Overall performance rank (1 is best): 14 out of 23
Break even failure rate: 9%
Average rise: 35%
Throwback rate: 29%
Percentage meeting price target: 76%
The above numbers are based on hundreds of perfect trades. See the glossary for definitions.
Horn Bottom Identification Guidelines
|Weekly chart||Use the weekly chart to locate horns.|
|Price trend||Downward leading to the pattern.|
|Shape||Looks like an inverted steer's horn, two parallel price spikes separated by a week.|
|Spikes||The spikes should be longer than most in the past year. They should plummet below the surrounding price landscape, including the middle week.|
|Confirmation||The pattern confirms as valid when price closes above the highest price in the 3-week pattern.|
Horn Bottom Trading Tips
|Measure rule||See the Measure Rule figure to the right.
Compute the height from the highest price (point
A) to lowest price (B) in
the 3-week pattern then multiply it by the above “percentage
meeting price target.” Add the result to the highest high in the pattern
(A) to get a target (C).|
|Uptrends||Some horns appear near the end of uptrends, so watch for a trend change.|
|Downtrends||Horns will usually not mark the end of a downtrend, but they will be close, say within a buck or so.|
|Height||Tall horns perform better than short ones.|
|Volume||Horns with heavy breakout volume tend to do
with volume heavier on the left spike and light on the right tend to outperform.
The Spike Volume figure to the right shows an example of heavy left spike volume.|
|Inside week||When the right horn is inside the trading range of the
left horn (an inside week), the horn tends to outperform. The Inside Week figure to
the right shows an example of this. Spike AB is taller
and completely covers spike CD.|
|Price Difference||Horns with a large price difference between the spike
valleys tend to outperform. Using the Inside Week figure to the right, that means
the price difference between bottoms B and
|Throwbacks||Throwbacks hurt performance.|
|Confirmation||Wait for price to close above the highest price in the pattern before taking a position.|
The Measure Rule
Horn Bottom Example
The above figure shows two examples of horn bottoms on the weekly scale. Each pair of red Hs represents one
horn bottom. Price confirms the pattern when it closes above the highest peak in the 3-week pattern. I show this as a
red line. Buy the following week.
-- Thomas Bulkowski
Copyright © 2005-2013 by Thomas N. Bulkowski. All rights reserved. Upgrade definition: take out old bugs, put in new ones.