Bulkowski’s Partial Declines
S&P 500 (^GSPC):
As of 05/20/2013
15,335 -19.12 -0.1%
6,511 -38.17 -0.6%
515 -2.00 -0.4%
3,496 -2.54 -0.1%
1,666 -1.18 -0.1%
or 14,850 by 06/01/2013
or 6,200 by 06/01/2013
or 500 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.
Partial declines are looping chart patterns that appear at the end of broadening patterns
and rectangles. They predict an immediate upward breakout but are not always correct.
Partial Decline Identification Guidelines
|Established||The rectangle or broadening
chart pattern should be an established one, meaning that it should obey all of the identification guidelines for that pattern.
Don’t look for a partial decline until you have a completed rectangle or broadening chart pattern.|
|Top trendline||Price should touch the top trendline and move down but not touch or come that close to the bottom trendline before heading back up. When price touches
the upper trendline, it usually stages an immediate upward breakout. Sometimes, it may linger at the upper trendline before
breaking through. If price bounces downward, close out your position.|
|Breakout||Upward. This usually occurs immediately after the partial decline touches the upper trendline.|
|Pause||Price often pauses partway across a chart pattern so it may look like a partial decline is forming. Wait for price to head back up before buying the stock.|
Partial Decline Trading Tips
|Price loop||If price bounces off the upper trendline and heads back down, then rounds over before coming close to the bottom trendline, then it may be a partial decline.
Buy once it’s clear that price is heading back toward the upper trendline.|
|Fibonacci||A trend reversal at the 50% or 62% Fibonacci retrace of the prior up move may signal a partial decline.|
|Pause||Price may pause at the upper trendline, perhaps slide along it before breaking out upward.|
|Exit||Exit your position if price bounces off the upper trendline and heads back down.|
|Breakout||Expect an upward breakout after a partial decline.|
Partial Decline Patterns
The following table shows how often a partial decline correctly predicts an upward breakout in bull markets.
|Broadening formations, right-angled and ascending||81%|
|Broadening formations, right-angled and descending||63%|
|Broadening wedges, ascending||35%|
|Broadening wedges, descending||87%|
Partial Decline Example
The above figure shows an example of a partial decline in a broadening bottom chart pattern. By the time the partial
decline appeared, the broadening bottom had enough trendline touches to qualify as a valid chart pattern. Price
attempted to touch the bottom trendline but did not make it. The reversal suggested an upward breakout was in the offing and that was exactly what happened.
-- Thomas Bulkowski
Other Partial Decline Examples
Copyright © 2005-2013 by Thomas N. Bulkowski. All rights reserved. Black holes are out of sight.