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 | ||
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Encyclopedia of Chart Patterns Second Edition
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Statistics updated 8/27/2020.
I discovered the diving board chart pattern on November 25, 2010 -- Thanksgiving Day -- when I went shopping for stocks to buy. I noticed that price formed a flat base (the diving board) and then plunged downward (diving into the water) followed by a straight-line run up (returning to the surface and climbing out of the water). The flat base and downward plunge reminded me of jumping off a diving board, hence the pattern's name.
I found 760 diving board patterns with upward breakouts using the weekly charts in 513 stocks from May 1990 to June 2019. It's somewhat rare but plentiful enough to find during a diligent search. A spot check of the pattern reveals that it also appears on the daily charts, but I didn't study those. The discussion below pertains to diving boards on the weekly scale.
The ideal diving board chart pattern, in the graphic below, shows the shape of the pattern.
Ideal Diving Board Pattern
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The above numbers are based on 760 perfect trades in a bull market on the weekly price scale. See the glossary for definitions.
| Characteristic | Discussion |
| Weekly scale | Use the weekly price chart to find this pattern. |
| Price trend | I removed most diving boards which appeared in downward trends. I prefer to find them in flat or upward trends. |
| Diving board | Look for price to have a flat bottom, not top (the top can be any shape, but a flat bottom is critical). This is the diving board. |
| Plunge | Price makes a straight-line run down or nearly so (see Plunge in the figure below). This is the plunge into the water. |
| 2nd Plunge | Avoid trading patterns which make a second, lower plunge. |
| Recovery | After the sharp drop, price recovers, sometimes in a straight-line run upward. This is the move from the bottom of the pond back onto shore. |
Look for the diving board chart pattern on the weekly scale. That's the scale I was using when I noticed it, so you can find it on the daily and other charts but performance will vary.
Price should make a flat base. In other words, the bottoms of price should line up with few outliers plunging through the bottom. I prefer a tight congestion region that's horizontal, but allow variations. I counted a few patterns with slanting bases (forming symmetrical triangles). A horizontal congestion region seemed to give the best performance. The median width of the pattern (including the plunge) was 204 days (about 7 months).
After the flat base, look for a price plunge. I prefer a straight-line drop down, not one that meandered lower and had lots of consolidation regions. I wanted the decline to be a serious one, one that shakes bulls to the core.
The drop from the bottom of the board portion of the pattern to the plunge low was a median of 14%.
Note: The following paragraph refers to data updated in February 2018. Once price reverses at the bottom of its plunge, it rises often in a straight-line move up (but not always). I found that 88% climbed far enough to at least reach the bottom of the board before encountering a trend change (a drop of at least 20%). Twenty-five percent stopped rising within the diving board (top of pattern to bottom of the board, not the plunge). Fully 63% continued rising above the top of the pattern.
The median diving board length was 204 days (from board start to plunge low). Those with boards narrower than 204 days showed gains averaging 67% versus those with longer boards and gains of 80%.
| Trading Tactic | Explanation |
| Diving board length, height | Wider (longer than 204 days) is better. Taller is better (height divided by the breakout price (pattern top) greater than 27%). |
| Ride it | Price returns to the diving board bottom 88% of the time before changing trend |
| Buy signal | When price closes above the top of the chart pattern, buy. The gain from there to the ultimate high averages 73%. This is the preferred method to trade a diving board. |
| 2nd Plunge | Avoid trading patterns which make a second, lower plunge. |
If you can determine when the plunge has ended, such as using a down-sloping trendline, then that could get you into the trade early.
Hold onto the trade as long as the upward trend continues. As a benchmark, I used a trend change to signal the end of a trend. That means price turned down at least 20% after peaking. Measuring the climb from the plunge low to that peak showed that 88% of the patterns had price reaching or exceeding the bottom of the diving board.
Trading the rise from the plunge low back to the bottom of the board (or higher), is a high risk proposition. The preferred method of trading a diving board, is to wait for price to close above the top of the pattern, then buy and hold for a year, perhaps two.
The chart shows an example of a diving board chart pattern on the weekly scale in Albemarle (ALB), outlined in red.
Price moves horizontally in a congestion region for about four months before making a plunge lower. Traders versed in chart patterns will recognize a descending triangle (thin green line on the top, red below).
The stock reversed after the plunge bottomed in February. The stock recovered nicely and continued to soar above the top of the diving board pattern.
-- Thomas Bulkowski
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