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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 Ugly Pattern Performance Study

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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 05/26/2017
21,080 -2.67 0.0%
9,176 12.36 0.1%
720 -0.08 0.0%
6,210 4.93 0.1%
2,416 0.75 0.0%
YTD
6.7%
1.5%
9.2%
15.4%
7.9%
Tom's Targets    Overview: 05/15/2017
21,400 or 20,450 by 06/01/2017
9,500 or 8,700 by 06/01/2017
730 or 700 by 06/15/2017
6,350 or 6,000 by 06/01/2017
2,450 or 2,375 by 06/15/2017

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.

Do perfectly shaped chart patterns perform better or worse than ugly ones? In a test of two chart pattern types, the uglier patterns outperformed the well-shaped ones.

Ugly Pattern Performance: Detailed Results

I looked at double bottoms and double tops to determine whether ugly (uneven) tops or bottoms performed better than those with even peaks or valleys. Here's what I found.

Peak to peak price difference =>0-1%1-2%2-3%3-4%4-5%
Double tops15.5% (276)17.3% (320)19.3% (57)21.5% (21)29.9% (17)
Double bottoms31.5% (304)32.0% (378)33.6% (277)33.3% (232)42.8% (73)

Numbers in parentheses are samples used in the test and the percentages are the average move post breakout. Double bottoms have the most samples. When the valleys are within 0 to 1% in price from each other, the rise averages 31.5%. When the valleys are 4 to 5% apart in price, the rise averages 42.8%. Thus, the uglier the chart pattern, the better the performance.

Ugly Pattern Performance: Definitions

I measured the rise or fall from the breakout price to the ultimate high or low. A breakout occurs when price climbs above the highest high between the double bottoms, or below the lowest low between the double tops. The ultimate high is the highest high before price tumbles at least 20%. The ultimate low is the lowest low before price rises at least 20%. In the test, I used 1,275 stocks covering 7/1991 to 3/2006. Not all stocks covered the entire period and only qualifying double tops and bottoms were used. I found 2,239 double top or bottom patterns, but not all of them had usable data (the ultimate high or low wasn't found yet because price hadn't reversed).

-- Thomas Bulkowski

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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. Never trim your moustache before applying Chapstick.