As of 12/20/2024   Indus: 42,840 +498.02 +1.2%     Trans: 15,892 +32.54 +0.2%     Utils: 986 +14.76 +1.5%     Nasdaq: 19,573 +199.83 +1.0%     S&P 500: 5,931 +63.77 +1.1%	YTD  +13.7%   0.0%    +11.9%    +30.4%    +24.3%	Targets    Overview: 12/12/2024     44,200 or 41,750 by 01/01/2025   16,100 or 17,700 by 01/01/2025   1,050 or 975 by 01/01/2025   20,500 or 19,300 by 01/01/2025   6,100 or 5,775 by 01/01/2025
Chart Pattern Indicator: on 12/5/24

As of 12/20/2024   Indus: 42,840 +498.02 +1.2%     Trans: 15,892 +32.54 +0.2%     Utils: 986 +14.76 +1.5%     Nasdaq: 19,573 +199.83 +1.0%     S&P 500: 5,931 +63.77 +1.1%	YTD  +13.7%   0.0%    +11.9%    +30.4%    +24.3%
Targets    Overview: 12/12/2024     44,200 or 41,750 by 01/01/2025   16,100 or 17,700 by 01/01/2025   1,050 or 975 by 01/01/2025   20,500 or 19,300 by 01/01/2025   6,100 or 5,775 by 01/01/2025
Chart Pattern Indicator: on 12/5/24

Bulkowski on the 2-Did Pattern

Initial release: 12/19/24.

The 2-did pattern is a subset of the 2-Dance pattern. While exploring the 2-dance pattern, I found that inside days (a chart pattern) worked well, so this sheet explores the combination of a 2-dance pattern and an inside day, called a 2-did.

Summary Introduction Identification, Trading Target Exit Testing Target Exit, Stock Performance Target Exit, ETF Performance Target Exit, Cryptocurrency Performance See Also

2-Did

2-Did: Summary

The most important questions with this candle pattern is does it outperform an inside day and the 2-price bar benchmark? The short answer is yes, but only in stocks (because of few trades in ETFs and cryptocurrencies).

Let's compare the 2-did pattern to the inside day.

Notes: * 32 trades, ** 10 trades.

Let me explain the above results. I compared the performance of the 2-did pattern against the garden variety inside day. The 2-did is more rare than the inside day because of the minimum height restriction placed on the 2-did (50% taller than the average price bar).

The 2-did beat the performance of the inside day in stocks. For ETFs, I think it underperforms because ETFs don't usually have two unusually tall (adjacent) days, so samples are comparably few and performance suffers.

In the crypto space, the number of trades (10 and 32) is too few to base an analysis for the 2-did. The inside day, by comparison, has more than 1,500 cryptocurrency samples. Even though the 2-did performs well, don't believe the results.

2-Did: Introduction

The 2-did pattern has two tall (50% taller than the average height of the prior month's price bars) and adjacent price bars. The second bar is an inside day. That is, the second price bar is inside the trading range of the prior price bar, like that shown in the figure.

2-Did: Identification and Trading Guidelines

2-Did: Target Exit Testing

For finding the 2-did pattern, look at the image on the right.

Restrictions are few on the two price bars. Each price bar in the 2-bar pattern (AB) must be more than 1.5 times the height of the average price bar measured one month (22 price bars) before the start of the 2-did pattern.

The second price bar (B) is inside the high-low trading range of the first bar (A).

Because I used the daily chart, I discarded any trade which showed a buy and sale on the same day. In actual trading, you might find that a trade entry and exit triggered on the same day, but I couldn't tell which came first, so I disallowed the condition.

In the tests that follow, I measured only upward breakouts in bull markets. The benchmark uses the same securities as the 2-did but picks two adjacent, any size, price bars, selected so their number didn't overload the spreadsheet (meaning I skipped x number, picked one, skipped another x number, and so on). I tested from 1990 to December 2024, in many securities. Few securities had data over that entire span. Also, at the time the pattern appeared, the low price had to be above $5 (meaning no penny stocks).

2-Did: Target Exit, Stock Performance

This is an example of a 2-did pattern in a stock. Notice that the price bars are much taller than most others in the month before the pattern appears. The second price bar is inside the high-low range of the first bar in the pattern.

For testing, I placed a buy stop a penny above the first price bar (the taller of the two bars) and a stop loss order a penny below the first price bar. An order to sell was set by computing the height of the 2-did pair added to the top of it.

In the figure, you can see the stop loss order placement and the entry price brackets the first price bar of the 2-did. The day after the pattern completed, the stock triggered the buy stop to enter the trade. Price advanced up the chart and trigged the target exit.

Let's compare performance in stocks with the 2-did pair versus the benchmark. The benchmark represents randomly selected, 2-adjacent price bars in the same stocks traded over the same period as the 2-did patterns.

In the test, I used 497 stocks with data from January 1990 to December 2024 but not all stocks covered the entire period.

The 2-did pattern substantially outperformed the benchmark ($103.39 versus $48.01 in uptrends). Downtrends produced a higher average profit, $112.40 per trade. Because the breakout is upward, the downtrend 2-did pattern acts as a reversal and it performs better than the continuation version (up breakout in an uptrend) of the 2-did.

The reason for the high profit is the requirement that the 2-did pair be tall. That sets a higher target, meaning higher profit, but it's also harder to reach the target (higher percentage loss).

2-Did: Target Exit, ETF Performance

Pictured is a 2-did trade in ITA, which is an exchange traded fund.

The trading rules for ETFs were the same as for stocks. I placed a stop loss order a penny below the bottom of the 2-did and a buy stop a penny above the top of it.

The chart shows the trade opened two days after the 2-did completed with an upward breakout.

About five weeks later, the ETF climbed far enough to reach the sale price, leaving a profitable trade behind. The exit was timely. The ETF dropped after the sale.

Does the performance of the 2-did pattern work better in ETFs than in stocks? Let's take a look at the results in the following table.

This is the same test as the prior one except I used 94 exchange traded funds (ETFs) instead of common stocks.

Because of the identification restrictions on the 2-did pattern (tall price bars), few trades happened. The results were particularly bad for downward breakouts, substantially underperforming the benchmark with the average trade losing $28.90.

Don't trade the 2-did in ETFs. You'll have a hard time finding them, anyway.

2-Did: Target Exit, Crypto Performance

I show the 2-did in cryptocurrency BTC-USD (bitcoin) on the daily scale.

Trading followed the same rules as already described.

Entry triggered almost two weeks after the 2-did completed. After a week or so of moving sideways, the currency skyrocketed and climbed far enough to reach the exit.

However, there were too few trades in the crypto-securities I followed, so I don't show numerical results.

-- Thomas Bulkowski

See Also

• How did I test small patterns in stocks, ETFs, and crypto currency?
• Small pattern performance.
• Updated daily list of short patterns.

Below are other short patterns...

• 2-Dance
• Key reversal, uptrend
• Key reversal, downtrend
• Hook reversal, downtrend
• Hook reversal, uptrend
• Inside day
• Outside day
• Open-close reversal, uptrend
• Open-close reversal, downtrend
• Pivot point reversal, uptrend
• Pivot point reversal, downtrend
• Upside weekly reversals
• Downside weekly reversals

I have flabby thighs, but fortunately my stomach covers them.