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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 Up-Sloping Trendlines

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Busted
Patterns
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Patterns
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Market
Industrials (^DJI):
Transports (^DJT):
Utilities (^DJU):
Nasdaq (^IXIC):
S&P500 (^GSPC):
As of 09/18/2017
22,331 63.01 0.3%
9,515 -31.61 -0.3%
739 -7.54 -1.0%
6,455 6.17 0.1%
2,504 3.64 0.1%
YTD
13.0%
5.2%
12.0%
19.9%
11.8%
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.

Up-Sloping Trendlines: Summary

Price follows trends. When you draw an up-sloping line along the price valleys, it often touches the line and rises away from it without piercing it. The line is called a trendline because it shows the price trend.

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My book, Trading Classic Chart PatternsTrading Classic Chart Patterns book., pictured on the left, has two, yes, two, chapters dedicated to trendlines.

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

 

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Up trendline chart pattern

Up Trendline Chart Pattern

Up-Sloping Trendlines: Identification Guidelines

CharacteristicDiscussion
Log scaleUse the logarithmic scale. Price will signal a trend change sooner on the log scale than on the arithmetic scale.
Minor highsDraw an up-sloping trendline along the price valleys. That way, when the trend changes from up to down, you'll know with a trendline pierce. The numbers in the above chart show price touching the trendline.
TouchesThe more touches a trendline has the more powerful the move after a trendline pierce.
SpacingWidely spaced touches (over the median 28 days each) suggest a more powerful move post breakout.
LengthLong trendlines (more than the median 137 days) are more important than short ones. They lead to more powerful declines after the trendline pierce.
SlopeShallow trendlines (up to 45 degrees) are more reliable than steep ones (over 60 degrees). Again, they lead to more powerful moves after the trendline pierce.
VolumeAn upward volume trend results in a more powerful drop after the trendline pierce.
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I examined 199 trendlines and evaluated the price performance after price closed below the up-sloping trendline. I tracked the price move until it bottomed and then climbed by at least 20% (a trend change). The move from the trendline breakout price to the low price was the measure.

For example, I found 141 trendlines with 4 or fewer price valleys touching the trendline. Price after the downward breakout dropped 16%. This compares to a drop of 18% from 58 trendlines with more than 4 touches. I concluded that the more touches, the more powerful the decline after the trendline breakout, although the results are close. Consult my Trading Classic Chart Patterns book for more information on the results.

Up trendline measure rule

Up-Sloping Trendlines: The Measure Rule

Use the measure rule to predict how far price will tumble after a downward breakout (a price pierce) from the trendline. The figure to the right shows an up-sloping trendline with price breaking out downward at point B.

From the breakout, find the prior minor low trendline touch. I show it as point A. Measure the widest distance between those two points (re, A and B), measured vertically. In this case, that's the distance from C to D. Multiply that distance by 63% because that's how often this method works when a full height is used, and project the result downward from the breakout price (B) – the point where price pierces the trendline.

For example, if the high at C is 10 and directly below that at point D, the trendline is at 8, the difference is 2. Multiply this by 63% to get 1.26. Suppose the breakout at point B is at 9. That would give a price target of 7.74 (9 – 1.26). If the projected decline is less than 0, ignore the result.

-- 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. No matter how cynical you become, it's never enough to keep up. -- Lily Tomlin