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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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Chart Patterns: After the Buy
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Bulkowski's Market Cap and Performance

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Busted
Patterns
Candles Chart
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Market
Industrials (^DJI):
Transports (^DJT):
Utilities (^DJU):
Nasdaq (^IXIC):
S&P500 (^GSPC):
As of 09/20/2017
22,413 41.79 0.2%
9,654 147.29 1.5%
732 -5.08 -0.7%
6,456 -5.28 -0.1%
2,508 1.59 0.1%
YTD
13.4%
6.8%
10.9%
19.9%
12.0%
Tom's Targets    Overview: 09/14/2017
22,450 or 21,500 by 10/01/2017
9,750 or 9,200 by 10/01/2017
775 or 730 by 10/01/2017
6,650 or 6,200 by 10/01/2017
2,600 or 2,425 by 10/01/2017

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.

Do small cap stocks outperform big caps? Yes. This study takes a closer look.

 

Market Cap Background

Market capitalization is the number of shares outstanding multiplied by the stock price (or in this case, the chart pattern breakout price). I classify capitalization into three categories: small cap stocks (up to $1 billion), mid caps ($1 billion to $5 billion), and large caps (over $5 billion).

Market Cap Details

I measured the rise from the breakout price to the ultimate high (the highest high before price tumbled by at least 20%), or the decline to the ultimate low (the lowest low before price climbed by at least 20%). Then I sorted the stocks by market capitalization. I found that chart patterns in small cap stocks performed best, followed by mid caps, and then large caps.

For example, price after a head-and-shoulders bottom climbed an average of 42% in 154 samples taken from small cap stocks. Mid cap stocks (147 samples) climbed 33%, on average, after the breakout and large caps climbed 27% (64 samples) post breakout. Thus, small caps outperformed followed by mid and large cap stocks, respectively.

For more information (time period covered, sample size and so on), refer to my book, Trading Classic Chart Patterns. It shows the percentage rise or decline for each pattern, sorted by capitalization.

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Market Cap Results

Nineteen patterns perform best in small cap stocks.

  • Adam & Adam double tops
  • Adam & Eve double tops
  • Ascending scallops (upward breakout)
  • Ascending triangles (upward breakout)
  • Broadening tops (downward breakout)
  • Broadening tops (upward breakout, tied with large cap stocks)
  • Descending scallops (upward and downward breakouts)
  • Descending triangles (upward breakout)
  • Diamond tops (downward breakout)
  • Eve & Adam double bottoms and tops
  • Eve & Eve double bottoms
  • Head-and-shoulder bottoms
  • Head-and-shoulders tops
  • Rectangles (upward breakout)
  • Symmetrical triangles (upward breakout)
  • Triple bottoms (tied with large cap stocks)
  • Triple tops

Six patterns perform best in mid cap stocks

  • Adam & Adam double bottoms
  • Adam & Eve double bottoms
  • Ascending scallops (downward breakout)
  • Ascending triangles (downward breakout)
  • Descending triangles (downward breakout)
  • Eve & Eve double tops

Three patterns perform best in large cap stocks

  • Broadening tops (upward breakout, tied with large cap stocks)
  • Symmetrical triangles (downward breakout)
  • Triple bottoms (tied with large cap stocks)

-- 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. If it's worth doing, it's worth overdoing.