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Bulkowski's Spikes or Tails
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Market
Industrials (^DJI):
Transports (^DJT):
Utilities (^DJU):
Nasdaq (^IXIC):
S&P 500 (^GSPC):
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As of 09/02/2010
10,320.10 50.63 0.5%
4,342.03 58.62 1.4%
396.87 -0.49 -0.1%
2,200.01 23.17 1.1%
1,090.10 9.81 0.9%
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YTD
-1.0%
5.9%
-0.3%
-3.0%
-2.2%
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 400 by 09/15/2010 |
CPI:  on 08/27/2010 |
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Written by and copyright © 2005-2010 by Thomas N. Bulkowski. All rights reserved.
Spikes, or tails as they are sometimes called, represent short-term price turning points. Bullish spikes plunge downward and are more reliable than those that tower upward.
This may be due to the upward bias the stock market has shown over time (for proof, look at the price of the Dow in the 1920s -- it was below 400).
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Spikes or Tails Chart Pattern
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Identification Guidelines
| Characteristic | Discussion |
| Price trend | Can be any direction leading to the pattern, but is usually in the direction of the spike (downward for bullish spikes, upward for bearish spikes). |
| Shape | A tall price move with the closing price near the base of the spike. |
| Closing price | For upward spikes, the close should be near the intraday low. For downward spikes, the close should be near the intraday high. |
| Volume | Usually heavy. |
| Bullish spike | Price spikes downward before closing near the intraday high. Price often represents a low turning point. |
| Bearish spike | Price spikes upward but closes near the intraday low. Price often forms a peak but usually does not represent a major or sustained turning point. |
| Wait a day | Wait a day to be sure that the price spike stands alone like the above picture shows. |
Trading Tips
| Trading Tactic | Explanation |
| Upward spike | For swing traders, expect a downward price swing. The turn may not last long, however. |
| Downward spike | Downward spikes represent more reliable price turning points than do upward ones. Buy once it’s clear the spike or tail stands alone like
a tall pine tree on a barren hill (that is, if you can imagine the hill and tree upside down). |
| Short term | Both upward and downward price spikes usually represent short-term turning points. Thus, don’t expect price to make a major and lasting trend change. |
| Caution | Be cautious with spikes where the close is not near the intraday low (upward spike) or high (downward spike). |
-- Thomas Bulkowski
Other Examples
- Tail in the Nasdaq composite, Jan 2010 (near end of post)
Copyright © 2005-2010 by Thomas N. Bulkowski. All rights reserved. I like you, but I wouldn’t want to see you working with sub-atomic particles.
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