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: 2/5/25.
This article discusses the bearish double-key reversal chart pattern, including what to look for and how it behaves in stocks and exchange traded funds (it is too rare in cryptocurrency).
For downward breakouts in bull markets, given the testing method I used (see Identification Guidelines), the bearish double-key reversal had the following success.
The tests which follow used upward breakouts only. Upward breakouts happened 39% of the time in stocks, so this pattern is bearish but not wildly bearish. This pattern does not work as well as trading a random selection of 3-price bars, so avoid trading this pattern from the bullish side in stocks and exchange traded funds.
The following table shows the identification rules, and are self-explanatory. Also refer to the adjacent chart.
These are the rules I used to test the pattern. They do not include the following:
| Characteristic | Discussion |
| Trend | I sorted the results by 5-day up and down trends (see Methodology), satisfying the requirement that "the [security] must be entering new high ground on a near-term basis." |
| Three Bars | This pattern is three price bars long. |
| Bar 1 | Price must close in upper 25% of the price bar. Shown on the chart, compute the 25% against the height of the first bar only, not other price bars. |
| Bar 2 | Price makes a higher high (above bar 1) but closes below bar 1's close. The high-low range of bar 2 is supposed to be short, perhaps on low volume, but I didn't check for this. |
| Bar 3 | Price posts a higher high (above bar 2) but closes below bar 2's close. If this is an outside day (higher high and lower low compared to prior bar), it could be helpful, but I didn't test this. |
For tests in stocks, ETFs, and cryptocurrency, I used these rules.
The chart shows a sample trade in DDD using a bearish double-key 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 | DKR In Up Trend | Up Trend Benchmark | DKR In Down Trend | Down Trend Benchmark |
| Trades | 1,568 | 5,877 | 1,208 | 5,278 |
| Average profit/loss per trade | $33.71 | $73.54 | $56.48 | $83.91 |
| Win/loss ratio | 40% | 41% | 40% | 42% |
| Average hold time (days) | 15 | 21 | 15 | 21 |
| Winning trades | 621 | 2,400 | 485 | 2,212 |
| Average gain of winners | 7% | 8% | 8% | 9% |
| Average hold time of winners (days) | 21 | 27 | 21 | 28 |
| Losing trades | 947 | 3,477 | 723 | 3,066 |
| Average loss | -4% | -5% | -4% | -5% |
| Average hold time of losers (days) | 13 | 17 | 13 | 18 |
The double-key reversal, tested as a bullish pattern, loses money in stocks regardless of the inbound (up or down) trend direction. Avoid trading this setup in stocks.
I show a sample trade in iShares U.S. Aerospace & Defense ETF (exchange traded fund, ITA).
Four days after the patterns ends, we have an upward breakout. Price continues to rise until it reaches the target exit price. The limit order triggers for a profitable trade.
The following table shows the results of 94 exchange traded funds (ETFs) instead of common stocks, using the same testing methodology.
| Metric | DKR In Up Trend | Up Trend Benchmark | DKR In Down Trend | Down Trend Benchmark |
| Trades | 295 | 6,792 | 176 | 5,700 |
| Average profit/loss per trade | $10.50 | $68.94 | $20.37 | $68.34 |
| Win/loss ratio | 39% | 44% | 39% | 43% |
| Average hold time (days) | 13 | 21 | 13 | 21 |
| Winning trades | 116 | 2,966 | 69 | 2,469 |
| Average gain of winners | 4% | 6% | 5% | 6% |
| Average hold time of winners (days) | 19 | 27 | 18 | 32 |
| Losing trades | 179 | 3,826 | 107 | 3,231 |
| Average loss | -2% | -3% | -3% | -4% |
| Average hold time of losers (days) | 11 | 17 | 13 | 19 |
The results of upward breakouts from the double-key reversal pattern underperform the benchmark. Do not trade this pattern in exchange traded funds. In other words, you'd do better by picking any three-bar pattern randomly and trading it with a height exit.
There were less than 30 trades in dozens of cryptocurrencies, so that is not enough samples to discuss.
-- 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