Subscribe to RSS feeds Bulkowski Blog via RSS

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

Support this site! Clicking the links (below) takes you to Amazon.com. If you buy ANYTHING, they pay for the referral.

Picture of Bumper.
Kindle
Paperback
Nook
Picture of the head's law.
Kindle
Paperback
Nook
Chart Patterns: After the Buy
Getting Started in Chart Patterns, Second Edition book.
Trading Basics: Evolution of a Trader book.
Fundamental Analysis and Position Trading: Evolution of a Trader book.
Swing and Day Trading: Evolution of a Trader book.
Visual Guide to Chart Patterns book.
Encyclopedia of Chart Patterns 2nd Edition book.

Bulkowski's Scoring Information

Class Elliott Wave Fundamentals Psychology Quiz Research Setups Software Tutorials More...
Busted
Patterns
Candles Chart
Patterns
Event
Patterns
Small Patterns
Market
Industrials (^DJI):
Transports (^DJT):
Utilities (^DJU):
Nasdaq (^IXIC):
S&P500 (^GSPC):
As of 07/26/2017
21,711 97.58 0.5%
9,484 -5.36 -0.1%
723 6.73 0.9%
6,423 10.58 0.2%
2,478 0.70 0.0%
YTD
9.9%
4.9%
9.5%
19.3%
10.7%
Tom's Targets    Overview: 07/14/2017
21,850 or 21,000 by 08/01/2017
9,950 or 9,400 by 08/01/2017
740 or 685 by 08/01/2017
6,450 or 6,175 by 08/01/2017
2,525 or 2,400 by 08/01/2017

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.

My book, Trading Classic Chart PatternsTrading Classic Chart Patterns book., shown on the left, is dedicated to the chart pattern scoring system, described below.

If you click on this link and then buy the book (or anything) at Amazon.com, the referral will help support this site. Thanks. -- Tom Bulkowski

$ $ $

 

Breakout Day Volume
Breakout day volume is a comparison of volume on the day price breaks out of the chart pattern with the 3 month average volume level. Chart patterns with high breakout day volume tend to perform better than do those with low breakout volume.
Flat Base
Flat base chart pattern If you know what a rectangle chart pattern looks like, then you know what a flat base is. Look for a price area in which the stock touches the same value multiple times over several weeks or months, often moving within a trading range. Price bounces between the upper and lower boundaries. Flat bases are rare but when they do occur, they can lead to powerful rallies.

Many chart patterns appear at a price just below the base, like a pothole in a road. The figure shows an example of this pothole pattern holding a diamond bottom after a flat base.

Gaps
Breakout day gap A gap occurs when yesterday's high is below today's low (bull gap) or yesterday's low is above today's high. Use the breakout day to see if price gapped from the prior day. If price has not broken out yet, then assume a gap will not occur. The figure shows an example of a breakout day gap from a diamond chart pattern.
Higher Right Bottom
Higher right bottoms Look at your triple bottom and determine whether bottom 3 is above, equal to, or below bottom 2. Research shows that in a triple bottom, price rises higher when the low price at bottom 3 is above the low price at bottom 2.
Horizontal Consolidation Region (HCR)
Horizontal consolidation region A horizontal consolidation region is a congestion area marked by a flat top, flat bottom, or both, or prices that share a common value. It is a support or resistance area, any area in which price moves horizontally. A HCR only occurs from the trend start to the start of the chart pattern. Thus, if a symmetrical triangle has price trending up to the triangle and the breakout is up, a HCR will not matter. For a downward breakout, you would score an HCR if one exists. I usually assume that a HCR will be in the way of the stock unless the breakout is at a new high.

The figure shows an example of overhead resistance. If the breakout were downward, then you would look for underlying support -- anything that might cause price to stop or reverse.

Top of page   More
Market Capitalization
Market capitalization is the number of shares outstanding for a stock multiplied by the breakout price. Many websites list market cap. Yahoo!Finance (finance.yahoo.com) lists market cap on the Key Statistics page (from their home page, enter a stock symbol, click Go, and Key Statistics will be listed on the far left column under Company).
Market Trend
The market trend is the difference in the S&P 500 index (or other major index that represents your market) from the day the chart pattern started to the day it ended. Often you can tell the trend just by looking at the index between those two dates.
Neckline Slope
Neckline slope
Figure 1
neckslopetop.jpg
Figure 2

A neckline joins the armpits of a head-and-shoulders chart pattern. Figure 1 shows a neckline sloping up (in red) and Figure 2 shows the red neckline sloping down.

Top of page   More
Shoulders
Shoulder lows Is the left shoulder low above the right shoulder low? Patterns with even shoulder lows perform best but they are rare. The figure to the left shows the left shoulder low is above the right one.
Shoulder Highs
shoulderhi.jpg Which shoulder is higher? A higher left shoulder suggests better performance. The figure shows a lower left shoulder.
Throwback and Pullbacks
Throwback A throwback occurs when price breaks out upward and returns to or comes close to the breakout price within a month. A pullback is the same, but the breakout is downward. I always assume a throwback or pullback will occur.

The figure shows an example of a throwback. When a throwback or pullback occurs, performance suffers. Thus, look for overhead resistance or underlying support that might cause price to reverse direction. When scoring a chart pattern, assume a throwback or pullback will occur unless price is making a new high.

Top of page   More
Trend Start
Trend start Trend start
Look back from the start of the chart pattern and determine where the trend starts, then measure the length of time from the beginning of the trend to the beginning of the chart pattern. To determine the trend start, the rule I use is this: look backward in time for the lowest low followed by a rise of at least 20%, or the highest high followed by a decline of at least 20%. Those turning points, the lowest low or highest high, represent where the trend starts. Most times, you can spot where the trend starts visually. Whether to search for the lowest low or highest high, I use whichever drops below or rises above the bottom/top of the chart pattern first. The above figures show examples of this method.
Volume Trend
Upward volume trend
Figure 3
Downward volume trend
Figure 4
Many chart patterns will do well, post breakout, if volume trends downward over the life of the chart pattern, but this varies from chart pattern to chart pattern. Measure the volume trend from start to end of the chart pattern. I use linear regression to determine the slope of the volume trend, but often you can tell the volume trend by looking. Use the above figures as examples. Figure 3 shows a rising volume trend, and Figure 4 shows a falling trend.
Yearly Price Range
Look at a chart for the stock over the last 12 months and find the highest high and lowest low during that time (up to but not including the breakout day), then enter the prices in the space provided on the scoring form.

-- Thomas Bulkowski

Top of page   More  

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. People living in glass houses shouldn't.