As of 02/21/2025
Indus: 43,428 -748.63 -1.7%
Trans: 16,034 -430.64 -2.6%
Utils: 1,023 +3.75 +0.4%
Nasdaq: 19,524 -438.35 -2.2%
S&P 500: 6,013 -104.39 -1.7%
|
YTD
+2.1%
+0.9%
+4.1%
+1.1%
+2.2%
|
 42,500 or 45,000 by 03/01/2025 16,900 or 15,800 by 03/01/20251,050 or 970 by 03/01/202519,200 or 20,500 by 03/01/20255,875 or 6,200 by 03/01/2025 |
As of 02/21/2025
Indus: 43,428 -748.63 -1.7%
Trans: 16,034 -430.64 -2.6%
Utils: 1,023 +3.75 +0.4%
Nasdaq: 19,524 -438.35 -2.2%
S&P 500: 6,013 -104.39 -1.7%
|
YTD
+2.1%
+0.9%
+4.1%
+1.1%
+2.2%
| |
|
42,500 or 45,000 by 03/01/202516,900 or 15,800 by 03/01/20251,050 or 970 by 03/01/202519,200 or 20,500 by 03/01/20255,875 or 6,200 by 03/01/2025 | ||
Initial release: 2/10/25.
This article discusses the bullish 2-close reversal chart pattern, including what to look for and how it behaves in stocks, exchange traded funds, and cryptocurrency.
This pattern is a poor performer. It marginally beats the benchmark in stocks when it appears in an uptrend ($76.96 versus $73.54), can't beat the benchmark in downtrends, and flops in both ETFs and cryptocurrency, regardless of the inbound trend direction.
Look elsewhere for a more promising pattern
The following table shows the identification rules, and are self-explanatory. Also refer to the adjacent chart.
| Characteristic | Discussion |
| Three Bars | This pattern is three price bars long. |
| Bar 1 | Any price bar. |
| Bar 2 | Price makes a lower low (below bar 1), and closes below bar 1's close. |
| Bar 3 | Price posts a lower low (below bar 2's low), but closes above bar 1 and 2's close. The red line in the figure shows a close above the prior two bars. |
| Breakout | Breaks out upward 71% of the time. |
| Target | Hits the height exit target (2 times pattern height added to top of pattern) 38% of the time. |
For tests in stocks, ETFs, and cryptocurrency, I used these rules.
The chart shows a sample trade in DDD using a bullish 2-close reversal with an upward breakout (highlighted in the red box). Entry occurs on the breakout day but the stock doesn't rise far enough to reach the target exit (not shown). Instead, the trade is stopped out for a loss when the stock drops.
The following tables shows results for bull markets with upward breakouts and an inbound price trend either up or down. I used 489 stocks in the test.
| Metric | 2-Close In Up Trend | Up Trend Benchmark | 2-Close In Down Trend | Down Trend Benchmark |
| Trades | 6,873 | 5,877 | 5,855 | 5,278 |
| Average profit/loss per trade | $76.96 | $73.54 | $83.09 | $83.91 |
| Win/loss ratio | 42% | 41% | 42% | 42% |
| Average hold time (days) | 18 | 21 | 19 | 22 |
| Winning trades | 2,867 | 2,400 | 2,442 | 2,212 |
| Average gain of winners | 8% | 8% | 8% | 9% |
| Average hold time of winners (days) | 23 | 27 | 23 | 28 |
| Losing trades | 4,006 | 3,477 | 3,413 | 3,066 |
| Average loss | -4% | -5% | -4% | -5% |
| Average hold time of losers (days) | 14 | 17 | 15 | 18 |
The bullish 2-close reversal slightly outperforms the benchmark when price is in an uptrend but falls short of the benchmark in a downtrend. This pattern is not a strong performer in stocks.
I show a sample trade in iShares U.S. Aerospace & Defense ETF (exchange traded fund, ITA).
Days after the patterns ends, we have an upward breakout. Price continues to rise for a time but can't go high enough to reach the target exit price (not shown). The stop loss order triggers for a losing trade.
The following table shows the results of 94 exchange traded funds (ETFs) instead of common stocks, using the same testing methodology.
| Metric | 2-Close In Up Trend | Up Trend Benchmark | 2-Close In Down Trend | Down Trend Benchmark |
| Trades | 1,769 | 6,792 | 1,420 | 5,700 |
| Average profit/loss per trade | $36.16 | $68.94 | $41.52 | $68.34 |
| Win/loss ratio | 42% | 44% | 41% | 43% |
| Average hold time (days) | 18 | 22 | 19 | 25 |
| Winning trades | 738 | 2,966 | 581 | 2,469 |
| Average gain of winners | 5% | 6% | 6% | 6% |
| Average hold time of winners (days) | 23 | 27 | 23 | 32 |
| Losing trades | 1,031 | 3,826 | 839 | 3,231 |
| Average loss | -3% | -3% | -3% | -4% |
| Average hold time of losers (days) | 14 | 17 | 15 | 19 |
The pattern in ETFs can't beat the benchmark for average profit per trade, regardless of the inbound price trend. Avoid trading this pattern in ETFs.
I show the bullish 2-close reversal in cryptocurrency AAVE versus US dollar. Breakout is upward the day after the pattern ends. The currency continues rising and it meets the target exit price easily enough for a winning trade.
| Metric | 2-Close In Up Trend | Up Trend Benchmark | 2-Close In Down Trend | Down Trend Benchmark |
| Trades | 271 | 393 | 233 | 391 |
| Average profit/loss per trade | $173.84 | $224.62 | $170.38 | $209.61 |
| Win/loss ratio | 43% | 48% | 42% | 45% |
| Average hold time (days) | 7 | 8 | 8 | 9 |
| Winning trades | 116 | 187 | 98 | 175 |
| Average gain of winners | 13% | 12% | 13% | 13% |
| Average hold time of winners (days) | 7 | 10 | 10 | 11 |
| Losing trades | 155 | 206 | 135 | 216 |
| Average loss | -7% | -7% | -6% | -6% |
| Average hold time of losers (days) | 6 | 7 | 7 | 7 |
The pattern fails to exceed the performance of the benchmark in both trend directions. Avoid trading this pattern in cryptocurrencies.
-- Thomas Bulkowski
Other 3-bar patterns
Support this site! Clicking any of the books (below) takes you to
Amazon.com If you buy ANYTHING while there, they pay for the referral.
Legal notice for paid links: "As an Amazon Associate I earn from qualifying purchases."
|
My Stock Market Books
|
My Novels
|
on