As of 04/17/2024
Indus: 37,753 -45.66 -0.1%
Trans: 14,987 -259.68 -1.7%
Utils: 853 +17.82 +2.1%
Nasdaq: 15,683 -181.88 -1.1%
S&P 500: 5,022 -29.20 -0.6%
|
YTD
+0.2%
-5.7%
-3.2%
+4.5%
+5.3%
|
 39,800 or 37,150 by 05/01/202416,200 or 15,000 by 05/01/2024885 or 850 by 05/01/202416,700 or 15,800 by 05/01/20245,250 or 5,025 by 05/01/2024 |
As of 04/17/2024
Indus: 37,753 -45.66 -0.1%
Trans: 14,987 -259.68 -1.7%
Utils: 853 +17.82 +2.1%
Nasdaq: 15,683 -181.88 -1.1%
S&P 500: 5,022 -29.20 -0.6%
|
YTD
+0.2%
-5.7%
-3.2%
+4.5%
+5.3%
| |
|
39,800 or 37,150 by 05/01/202416,200 or 15,000 by 05/01/2024885 or 850 by 05/01/202416,700 or 15,800 by 05/01/20245,250 or 5,025 by 05/01/2024 | ||
Updated: 3/11/2021.
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Trading Basics
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A price mountain is just like it sounds. Price makes a substantial rise and then reverses, leaving a peak on the price chart. This article describes statistics on the recovery after a price mountain.
Shown on the right is an example of a price mountain. The chart is on the monthly, linear/arithmetic (not semi-log) scale. Price forms a tall peak that the stock hasn't surpassed yet (as of 3/11/2021).
I performed the same test as I ran in 2013, using the same conditions (see 2013 Price Mountain Update).
In 731 samples, I found that the average time to rise above the top of a price mountain was 6.0 years (4.7 years median). That's for stocks which actually exceeded the peak.
For those still struggling to rise above the price mountain, the clock is still ticking, but it stands at 7.0 years (5.4 years median). That number includes stocks which did exceed the price mountain (that is, the prior test results are included). In 23% of the cases, the stock hasn't exceeded the peak yet.
I ran another test on price mountains in August 2013. Here are the details of that test.
I programmed my computer to find price mountains under the following circumstances.
I found 415 stocks with price mountains which gave me 749 samples. The time for price to reach or exceed the top of the mountain was 6 years. However, 35% of the samples have not exceeded the top of the mountain. Thus, the six years understates the actual value.
This test is different from the ones that follow since it does not bracket time into yearly highs.
For this study, I looked at 428 stocks from as early as 1981 to July 25, 2006, but few stocks covered that entire range. The data used a minimum of 5,598 samples. For each year, I found the yearly high (calendar year) and the date price exceeded that high. It took price 1.3 years (477 days) to exceed the calendar year high, on average.
If you include stocks not yet exceeding the yearly high (out of data), then the average time to exceed the yearly high reaches 1.6 years (598 days). The difference includes those stocks not making a higher high...yet.
What about stocks that trend up, as in the bull run to the peak in 2000? How long does it take a stock to recover and make a new high?
| Up Trend Length (years) | Recovery Time (years) | Recovery Time (years) for All Stocks Including Those not Making New Highs |
| 2 | 2.6 | 3.1 |
| 3 | 2.8 | 3.3 |
| 4 | 2.9 | 3.6 |
| 5 | 3.0 | 3.7 |
| 6 | 3.3 | 4.0 |
| 7 | 3.5 | 4.5 |
The table shows that when price makes a higher high the following year and then drops (that is, no higher high a year later), it takes an average of 2.6 years before price reaches the old high. If the upward price trend lasts for 3 consecutively higher yearly highs, then it takes 2.8 years to post a new high, on average.
If you assume that the end of data signifies a new high (that is, it includes all stocks whether they made a new high or not), then it would take 3.1 years to post a new high after trending up for 2 years (as of the date of the original study).
This has a major assumption and that being price making a new high the following year represents a higher trend. Most often, that is the case. But I didn't check to see if a higher low was also made (the common definition of an up trend is a higher high and a higher low). Nor does this analysis assume a straight-line run up.
The longer price trends upward, the longer it will take to recover and post a new high after a decline, on average. For example, if price makes a higher yearly high two years in a row and then declines (fails to make a higher high during the third year), it will take an average of 3.1 years before price makes a higher high.
How many stocks fail to make a new high? The table on the right shows the answer.
| Years to New High | Fail to Make a New High |
| 1 | 38% |
| 2 | 19 |
| 3 | 11 |
| 4 | 7 |
| 5 | 4 |
| 6 | 2 |
In words, 38% fail to make a higher high in 1 year. Nineteen percent fail to make a new high within 2 years. And so on.
-- Thomas Bulkowski
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