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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 Pipe Tops

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Busted
Patterns
Candles Chart
Patterns
Event
Patterns
Small Patterns
Market
Industrials (^DJI):
Transports (^DJT):
Utilities (^DJU):
Nasdaq (^IXIC):
S&P500 (^GSPC):
As of 12/13/2018
24,597 70.11 0.3%
9,673 -161.07 -1.6%
760 6.01 0.8%
7,070 -27.98 -0.4%
2,651 -0.53 0.0%
YTD
-0.5%
-8.9%
5.0%
2.4%
-0.9%
Tom's Targets    Overview: 11/28/2018
25,350 or 23,650 by 12/15/2018
10,600 or 9,650 by 12/15/2018
765 or 730 by 12/15/2018
7,350 or 6,750 by 12/15/2018
2,750 or 2,580 by 12/15/2018

Written by and copyright © 2005-2018 by Thomas N. Bulkowski. All rights reserved. Disclaimer: You alone are responsible for your investment decisions. See Privacy/Disclaimer for more information. Some pattern names are the registered trademarks of their respective owners.

Statistics updated on 12/3/2018.

For more information on this pattern, read Encyclopedia of Chart Patterns Second EditionEncyclopedia of Chart Patterns 2nd Edition book., pictured on the right, pages 550 to 562.

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Pipe tops are good performers in both bull and (especially) bear markets. Discovered by Thomas Bulkowski in 1998.

Pipe top chart pattern
Pipe Top Pattern

 

Pipe Top Important Bull Market Results

Overall rank: Not ranked
Break even failure rate: 13%
Average decline: 19%
Pullback rate: 28%
Percentage meeting price target: 54%

The above numbers are based on more than 4,000 perfect trades. See the glossary for definitions.

Pipe Top Identification Guidelines

CharacteristicDiscussion
Weekly chartPipes appear on the daily scale but the ones on the weekly charts perform better. Use the weekly chart.
Price trendUsually upward leading to the pattern.
ShapeTwin and adjacent upward spikes. On a bar chart, the two price bars look like spikes. On a candlestick chart, the candles can be any shape (from doji to Marubozu). In other words, don't let the term spike mislead you.
SpikesThe spikes should be longer than most others in the past year, but be flexible. They should tower over the surrounding price landscape.
OverlapThe spikes should have a large price overlap.
VariationThe price variation between tops is usually small but can vary up to $1 or more for high price stocks. The average difference is 20 cents.
VolumeThe right spike has lower volume when compared to the left spike.
ObviousThe pipe should stand-alone and be obvious on the chart.
RetraceThe best performing pipes appear at the top of a retrace in a prolonged downtrend.
ConfirmationThe pattern confirms when price closes below the lowest price in the pattern.
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Pipe Top Trading Tips

Trading TacticExplanation
Measure ruleCompute the height of the pattern from the highest high (point B in the Measure Rule figure to the right) to the lowest low (A) then multiply it by the above 'percentage meeting price target.' Subtract the difference from the lowest price in the pattern (A) to get a price target (C).
DowntrendsThe best performing pipes occur during downtrends. Price bounces upward, forms a pipe, and then continues the decline.
TrendsAvoid pipes that appear after a long downtrend. The pipe may signal the end of the trend.
Yearly lowPipes with breakouts within a third of the yearly low show the best performance.
PullbacksPullbacks hurt performance.
Pipe top measure rule
The Measure Rule
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Pipe Top Example

Pipe top chart pattern example

The above figure shows an example of a pipe top in the midst of a downward price trend. This is an example of the preferred setup, where a pipe top occurs when price is trending downward. The chart shows that price dropped from a low of about 8 to below 6.

-- Thomas Bulkowski

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See Also

Written by and copyright © 2005-2018 by Thomas N. Bulkowski. All rights reserved. Disclaimer: You alone are responsible for your investment decisions. See Privacy/Disclaimer for more information. Some pattern names are the registered trademarks of their respective owners. 56k baud makes you want to get out and push!