As of 06/18/2024
Indus: 38,835 +56.76 +0.1%
Trans: 14,898 35.14 0.2%
Utils: 909 0.27 0.0%
Nasdaq: 17,862 +5.21 +0.0%
S&P 500: 5,487 +13.80 +0.3%

YTD
+3.0%
6.3%
+3.0%
+19.0%
+15.0%

39,900 or 37,650 by 07/01/2024
15,800 or 14,300 by 07/01/2024
960 or 890 by 07/01/2024
17,800 or 16,750 by 07/01/2024
5,500 or 5,250 by 07/01/2024

As of 06/18/2024
Indus: 38,835 +56.76 +0.1%
Trans: 14,898 35.14 0.2%
Utils: 909 0.27 0.0%
Nasdaq: 17,862 +5.21 +0.0%
S&P 500: 5,487 +13.80 +0.3%

YTD
+3.0%
6.3%
+3.0%
+19.0%
+15.0%
 
39,900 or 37,650 by 07/01/2024
15,800 or 14,300 by 07/01/2024
960 or 890 by 07/01/2024
17,800 or 16,750 by 07/01/2024
5,500 or 5,250 by 07/01/2024
 
Pivot Point Reversal, Downtrend

Characteristic  Discussion 
1 bar  The pattern is composed of one price bar. 
Downtrend  Look for the pattern in a shortterm down trend. 
Close  The close must be above the prior day's high. 
Trading Tactic  Explanation 
Reversal  The pattern is supposed to act as a reversal of the up trend, and it does, but only 31% of the time in a bull market. 
Buy/Short  Once price closes above the top or below the bottom of the pattern, buy/short at the open the next day, respectively. 
Measure rule  The pivot point reversal fulfills the measure rule 77% of the time (bull market, up breakout). That is, measure the height of the pattern and add it to the high price to get an upward target or subtract it from the intraday low to get a downward price target. 
For the following statistics, I used 1,125 stocks, starting from January 1990 to March 2013, but few stocks covered the entire range. All stocks had a minimum price of $5. Since samples were so numerous, I used one every 25 patterns. There were two bear markets in the 2000s (as determined by the S&P 500 index), from 3/24/2000 to 10/10/2002 and 10/12/2007 to 3/6/2009. Everything outside of those dates represents a bull market.
For each pivot point reversal, I found when the trend started and when it ended. To find the trend peak or valley, I found the lowest valley and highest peak within plus or minus 10 days (21 days total) each, before the pivot point reversal and the same peak/valley test after the pivot point reversal. The closest valley or peak before the pivot point reversal is where the trend began. The closest peak or valley after the pivot point reversal is where the trend ended. I compared the peak or valley to the average of the high and low price of the pivot point reversal pattern (2nd day).
The 10bar peak or valley number tends to find major turning points on the daily charts.
I measured performance from the day after the breakout (opening price) to the nearest trend peak or trend valley.
To determine the inbound price trend (I was looking for a down trend), I used linear regression on the average of the highlow prices in the ten days before the pattern. That caught the shortterm trend.
Market/Breakout direction  5% Failure  Average Rise/Drop 
Bull market, up breakout  43%  7% 
Bull market, down breakout  48%  7% 
Bear market, up breakout  34%  9% 
Bear market, down breakout  29%  12% 
Table 1 lists failure rates, sorted by market condition and breakout direction along with the average rise or decline.
A failure occurs when the stock moves less than 5% in the breakout direction.
The failure rates may appear high, but that's typical for shortterm patterns like the pivot point reversal. The highest failures occur in a bull market.
Market/Breakout direction  Success 
Bull market, up breakout  77% 
Bull market, down breakout  73% 
Bear market, up breakout  70% 
Bear market, down breakout  77% 
Table 2 shows how often the measure rule works. Use the measure rule to estimate of how far price is likely to rise or drop.
To do this, measure from the high to the low in the pattern to get the height. Add the height to the high or subtract it from the low to get the target.
Market/Breakout direction  Bull/Up  Bull/Down  Bear/Up  Bear/down 
Net profit/loss  $71.03  $(55.99)  $(107.41)  $72.57 
Wins  56%  45%  44%  53% 
Winning trades  5,515  2,351  931  698 
Average gain of winners  $703.10  $743.59  $719.65  $766.38 
Losses  44%  55%  56%  47% 
Losing trades  4,292  2,915  1,189  625 
Average loss  ($741.15)  ($700.86)  ($755.01)  ($702.27) 
Average hold time (calendar days)  28  26  16  13 
Table 3 shows the performance based on 18,627 trades using $10 commissions per trade ($20 round trip), starting with $10,000 per trade. No other adjustments were made for interest, fees, slippage and so on.
Here's the setup.
For example, in a bull market after an upward breakout, the net gain was $71.03 for all trades. The method won 56% of the time and there were 5,515 winning trades. The average gain of winning trades was $703.10.
Fortyfour percent, or 4,292 trades were losers. They lost an average of $741.15.
The average hold time was 28 calendar days.
Notice how the gains and losses were pegged near 7%, which is how the test was setup.
The figure shows a pivot point reversal pattern in 3M (MMM) on the daily scale, at A.
The shortterm price trend is downward just before the pivot point reversal. At A, the stock closes above the prior day's high, confirming the reversal.
At B, the stock stages a breakout. Buy at the open the next day, C.
When price climbs 7% above the buy price, sell. I don't show that on the chart.
A stop placed 7% below the buy price would stop out the trade in case of a reversal. I don't show that either. Go figure.
 Thomas Bulkowski
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

111,111,111 x 111,111,111 = 12,345,678,987,654,321