As of 11/20/2024
Indus: 43,408 +139.53 +0.3%
Trans: 17,002 -26.31 -0.2%
Utils: 1,055 +1.25 +0.1%
Nasdaq: 18,966 -21.33 -0.1%
S&P 500: 5,917 +0.13 +0.0%
|
YTD
+15.2%
+6.9%
+19.7%
+26.3%
+24.1%
|
 46,000 or 43,000 by 12/01/202418,000 or 16,600 by 12/01/20241,075 or 1,000 by 12/01/202420,000 or 18,400 by 12/01/20246,100 or 5,800 by 12/01/2024 |
As of 11/20/2024
Indus: 43,408 +139.53 +0.3%
Trans: 17,002 -26.31 -0.2%
Utils: 1,055 +1.25 +0.1%
Nasdaq: 18,966 -21.33 -0.1%
S&P 500: 5,917 +0.13 +0.0%
|
YTD
+15.2%
+6.9%
+19.7%
+26.3%
+24.1%
| |
|
46,000 or 43,000 by 12/01/202418,000 or 16,600 by 12/01/20241,075 or 1,000 by 12/01/202420,000 or 18,400 by 12/01/20246,100 or 5,800 by 12/01/2024 | ||
Updated with new statistics on 12/29/2020.
The third edition of this book
Encyclopedia of Chart Patterns
$ $ $
The decline after a busted triple bottom averages 14% in a bull market, but that assumes the busted triple bottom is traded perfectly.
The figure shows an example of a single busted triple bottom. The triple bottom appears at ABC. The price trend is downward leading to the start of the triple bottom. This is almost always the case. After that, the three bottoms appear near the same price. In this case, B and C tend to form higher lows than A, but nothing is perfect. The ABC pattern is a very small and compact example of a triple bottom. Usually triple bottoms span many months.
Price breaks out upward from the triple bottom when price closes above the highest peak between the three bottoms. Price peaks in the triple bottom at F, at 67.39, and price climbs to G, 73.49, for a gain of 9%, just below the 10% cutoff for busted patterns.
After price peaks at G, it tumbles to D, where it closes below the bottom of the triple bottom, busting it. I highlight the lowest bottom with a horizontal red line. Price continues lower until bottoming at E. Point E, 57.18 is 11% below A, 64.37 (that is (64.37 - 57.18)/64.37 = 11%). That means price has dropped more than 10%, completing the single busted triple bottom.
For a single bust, look for:
The last point, 4, means the ultimate low must be more than 10% below the bottom of the triple bottom. If price fails to drop more than 10%, then it could be forming a double bust.
The chart of BMY shows a triple bottom at ABC. The horizontal red line marks the top of the chart pattern and the horizontal blue line highlights the bottom of the pattern.
Price confirms the triple bottom when it closes above the red line, but then the stock drops to D. Notice that D closes below the blue line, busting the upward breakout from the triple bottom. Price reverses immediately and climbs, closing above the horizontal red line at E. This busts the pattern for the second time.
Notice that the drop from the low at A to D is no more than 10% before it climbs to E. If the drop had exceeded 10%, then this would have been a single bust regardless of how far up price then moved. As it is, BMY is an example of a double busted triple bottom.
For a double bust, look for these elements.
If price fails to rise more than 10% above the top of the triple bottom a second time or if price closes below A (the lowest valley of the triple bottom), then it is a triple busted triple bottom. Sounds complicated, doesn't it?
I show a picture of CNET Networks on the daily scale. Price forms a triple bottom at ABC. Price confirms the triple bottom when it closes above the highest bottom. This occurs at D.
Price continues rising for a few more days to H then reverses. The climb from the red line to H is no more than 10%. Price then tumbles to E, closing below the bottom of the triple bottom (blue line). Notice that the drop from A to E is no more than 10%. This downward move and close below the triple bottom busts the chart pattern for the first time.
Price then climbs to F and closes above the red line, busting the pattern for the second time. The rise from the red line to F is no more than 10%. Then price reverses and drops to G (closing below A, the lowest low in the triple bottom), busting the triple bottom for a third time. At this point, I stopped counting.
If G were 10% below the blue line, it would complete the triple bust. In this example, however, price rises again and busts the triple bottom for a fourth time then drops and busts the chart pattern for the last time. Price drops more than 10% below the blue line, completing the busting count at five.
For a triple (or more) busted triple bottom, look for the following:
Here's a few statistics from the book.
I show a picture of Tellabs (TLAB) on the daily scale. The triple bottom is at ABC with valley C a bit above the other two. The horizontal red line marks the top of the triple bottom, and the horizontal blue line marks the bottom of the chart pattern.
Price confirmed the triple bottom when it closed above the red line, but it does not move far before gapping lower and closing below the blue line at D. When that happened, it busted the triple bottom.
Price recovered and eased higher for a month, going into January. Then, the company announced earnings at E and the stock began a dead-cat bounce. The actual bounce did not last long -- about a week in February -- before the decline resumed. This decline after the bounce is typical for a dead-cat bounce pattern.
The stock bottomed in August 2011 at 3.67 for a 45% decline below the triple bottom.
Before attempting to trade a busted triple bottom, ask yourself why would you? The average drop (for all busted triple bottoms) is just 14% and that's if you trade it perfectly. You will have the best success if the company, industry, and markets are all moving down. In other words, trade busted triple bottoms in a bear market or under unusually weak conditions.
For example, in a bear market, perfect trades from busted triple bottoms lose an average of 20% of their value (single busts lose 27%). That's almost 50% better performance than in a bull market.
-- Thomas Bulkowski
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