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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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Chart Patterns: After the Buy
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Bulkowski's Throwbacks

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Busted
Patterns
Candles Chart
Patterns
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Market
Industrials (^DJI):
Transports (^DJT):
Utilities (^DJU):
Nasdaq (^IXIC):
S&P500 (^GSPC):
As of 09/20/2017
22,413 41.79 0.2%
9,654 147.29 1.5%
732 -5.08 -0.7%
6,456 -5.28 -0.1%
2,508 1.59 0.1%
YTD
13.4%
6.8%
10.9%
19.9%
12.0%
Tom's Targets    Overview: 09/14/2017
22,450 or 21,500 by 10/01/2017
9,750 or 9,200 by 10/01/2017
775 or 730 by 10/01/2017
6,650 or 6,200 by 10/01/2017
2,600 or 2,425 by 10/01/2017

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, Visual Guide to Chart PatternsVisual Guide to Chart Patterns book., pictured on the left, has an entire chapter dedicated to throwbacks and pullbacks, starting on page 47.

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After an upward the breakout from a chart pattern, price lifts off then falters and returns to the launch price. This curling price behavior is called a throwback if it occurs within a month of the breakout.

 

Throwback

Throwback Chart Pattern

Throwback Identification Guidelines

CharacteristicDiscussion
ShapeThrowbacks can assume any shape.
TimeBy convention, a throwback occurs within 30 calendar days after the breakout.
White spaceThe stock must not slide along the breakout price but zoom up, curl around and return to, or come close to, the breakout price or chart pattern trendline (boundary).
VolumeHigh volume breakouts have a tendency to throwback more often than low volume ones.
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Throwback Trading Tips

Trading TacticExplanation
Expect oneExpect a throwback will occur.
Overhead resistanceThis is the chief cause of a throwback. Price bumps up against overhead resistance and then price tumbles. Be sure to look for prior peaks and valleys, horizontal consolidation regions (HCRs), and other signs of overhead resistance before trading.
Throwback rateSince year 2000, 58% of 10,305 chart patterns with upward breakouts had throwbacks.
TimePrice climbs for 6 days after the breakout, on average, before beginning the return journey.
Loop timeIt takes an average of 10 days, total, for price to complete the return trip back to the breakout, as measured from the breakout day to the day price returns.
HeightThe average height from the breakout price to the top of the throwback is 8%, but a frequency distribution shows that most rise 4% to 10%.
VolumeA high volume (above the 30-day average) breakout throws back 70% of the time, on average.
Price dropAfter the stock returns to the breakout price, 35% continue dropping below the chart pattern. That means 65% of the time price recovers.
Another throwback example
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For additional information on throwbacks and how you can improve profits by placing a tight stop, see the study on Money management.

Throwback Measure Rule

Throwback measure rule

The measure rule for throwbacks is similar to the measured move up chart pattern. Using the figure to the left as a reference, find where the upward price trend begins (the swing low at point A) and subtract the price from where the trend ends at B (the swing high). Add the difference to the throwback low at C to get a price target.

 

 

 

 

Throwback Price Trend

Price trend

The price trend leading to the breakout can help determine whether price will throwback or not. If price has more than 3 consecutively higher closes ending the day before the breakout, then expect price to have a lower probability of throwing back. See the study, Price Trends Leading to the Breakout.

 

 

 

 

Throwback Power Move

During a throwback attempt, if price remains above the breakout price, then expect a more powerful move than if price drops below the breakout. I measured this in 19 chart pattern types from July 1991 to March 2005 and found 10,348 chart patterns. Of that group, 3,167 had throwbacks. When price remained equal to or above the breakout price, the rise averaged 40% (400 samples qualified). When price dropped below the breakout, the resulting rise averaged just 29% (2,767 samples). The numbers measure the rise from the breakout to the ultimate high, which is the highest high before price tumbles by at least 20%.

-- Thomas Bulkowski

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Other Throwback Examples

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. It's a small world, but I'd hate to have to paint it.