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: 2/6/25.
This article discusses the bullish double-key reversal chart pattern, including what to look for and how it behaves in stocks, exchange traded funds, and cryptocurrency.
The bullish version of the double-key beats the performance of the bearish one by a long stride. However, sample counts (trades) are few so the results are subject to change. What does that mean? A winning pattern may result in losses in actual trading.
Be careful relying on this pattern.
The following table shows the identification rules, and are self-explanatory. Also refer to the adjacent chart.
The following table shows 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 low ground on a near-term basis." |
| Three Bars | This pattern is three price bars long. |
| Bar 1 | Price must close in lower 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 lower low (below bar 1), but closes above 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 lower low (below bar 2), but closes above 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 bullish 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 | 2,313 | 5,877 | 1,842 | 5,278 |
| Average profit/loss per trade | $36.97 | $73.54 | $84.06 | $83.91 |
| Win/loss ratio | 39% | 41% | 42% | 42% |
| Average hold time (days) | 16 | 21 | 16 | 21 |
| Winning trades | 899 | 2,400 | 782 | 2,212 |
| Average gain of winners | 7% | 8% | 8% | 9% |
| Average hold time of winners (days) | 22 | 27 | 23 | 28 |
| Losing trades | 1,414 | 3,477 | 1,060 | 3,066 |
| Average loss | -4% | -5% | -4% | -5% |
| Average hold time of losers (days) | 13 | 17 | 13 | 18 |
The bullish double-key reversal underperforms the benchmark when in an uptrend but marginally beats it in downtrends. This supports the notion that reversals outperform continuation patterns, but the results are mixed.
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. 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 | DKR In Up Trend | Up Trend Benchmark | DKR In Down Trend | Down Trend Benchmark |
| Trades | 330 | 6,792 | 204 | 5,700 |
| Average profit/loss per trade | $77.37 | $68.94 | $77.74 | $68.34 |
| Win/loss ratio | 45% | 44% | 41% | 43% |
| Average hold time (days) | 17 | 21 | 17 | 21 |
| Winning trades | 150 | 2,966 | 84 | 2,469 |
| Average gain of winners | 5% | 6% | 6% | 6% |
| Average hold time of winners (days) | 30 | 27 | 26 | 32 |
| Losing trades | 180 | 3,826 | 120 | 3,231 |
| Average loss | -3% | -3% | -3% | -4% |
| Average hold time of losers (days) | 14 | 17 | 15 | 19 |
The pattern in ETFs barely beats the benchmark for average profit per trade. However, trades are considerably fewer than the benchmark, meaning actual trading results may fall far short of theoretical ones.
I show the bullish double-key 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.
The chart shows the last bar in the pattern acting as an outside day.
| Metric | DKR In Up Trend | Up Trend Benchmark | DKR In Down Trend | Down Trend Benchmark |
| Trades | 43 | 393 | 24 | 391 |
| Average profit/loss per trade | $462.23 | $224.62 | $238.49 | $209.61 |
| Win/loss ratio | 63% | 48% | 46% | 45% |
| Average hold time (days) | 8 | 9 | 8 | 9 |
| Winning trades | 27 | 187 | 11 | 175 |
| Average gain of winners | 11% | 12% | 12% | 13% |
| Average hold time of winners (days) | 5 | 10 | 10 | 11 |
| Losing trades | 16 | 106 | 13 | 216 |
| Average loss | -7% | -7% | -6% | -6% |
| Average hold time of losers (days) | 13 | 7 | 6 | 7 |
The pattern outperforms the benchmark in both trend directions, which is good, especially the strong performance in uptrends. However, few currencies showed the pattern, so actual trading performance is subject to disappointment.
-- 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