As of 04/18/2024   Indus: 37,775 +22.07 +0.1%     Trans: 14,947 -39.62 -0.3%     Utils: 860 +6.95 +0.8%     Nasdaq: 15,602 -81.87 -0.5%     S&P 500: 5,011 -11.09 -0.2%	YTD  +0.2%   -6.0%   -2.4%    +3.9%    +5.1%	Targets    Overview: 04/12/2024     39,800 or 37,150 by 05/01/2024   16,200 or 15,000 by 05/01/2024   885 or 850 by 05/01/2024   16,700 or 15,800 by 05/01/2024   5,250 or 5,025 by 05/01/2024
Chart Pattern Indicator: on 4/1/24

As of 04/18/2024   Indus: 37,775 +22.07 +0.1%     Trans: 14,947 -39.62 -0.3%     Utils: 860 +6.95 +0.8%     Nasdaq: 15,602 -81.87 -0.5%     S&P 500: 5,011 -11.09 -0.2%	YTD  +0.2%   -6.0%   -2.4%    +3.9%    +5.1%
Targets    Overview: 04/12/2024     39,800 or 37,150 by 05/01/2024   16,200 or 15,000 by 05/01/2024   885 or 850 by 05/01/2024   16,700 or 15,800 by 05/01/2024   5,250 or 5,025 by 05/01/2024
Chart Pattern Indicator: on 4/1/24

Bulkowski on Predicting the Breakout Direction

My book, Getting Started in Chart Patterns, Second Edition, pictured on the left, discusses partial rises and declines starting on page 207.

If you click on the above link and then buy the book (or anything) while at Amazon.com, the referral will help support this site. Thanks.

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This article discusses how to predict the breakout direction from some chart patterns.

With some chart patterns, determining the breakout direction is easier than with other chart patterns. Let's take a look at broadening tops.

The chart of Apple Computer (AAPL) shows a broadening top chart pattern. There are a number of identification guidelines that help with identification. They are:

1. Price should trend up leading to the start of the pattern (if it trends downward, it's a broadening bottom).
2. The shape of the pattern should resemble a megaphone with the smaller end toward the left, wider to the right.
3. Price follows two diverging trendlines, one along the peaks and another along the valleys.
4. Price should touch each trendline at least twice.
5. Look for partial rises and declines.

The chart shows a partial decline. Once the broadening top has passed the identification guidelines (meaning only begin looking for a partial rise or decline after point 2 in this case, since bottoms 4, 5, and 6 were made earlier) then watch for price to drop from the top trendline but not make it down to the lower trendline. In broadening tops, these partial decline correctly predict an immediate upward breakout 72% of the time.

In this example, the breakout was not immediate as the partial decline predicted, even though it correctly signaled an upward breakout. It took another move down before price recovered and broke out upward.

You can review the links for more information on these pre-breakout features. You will find partial rises and declines helpful in all varieties of broadening patterns as well as rectangles and even triangles.

The following patterns show partial rises and declines

• Broadening top chart patterns.
• Broadening bottom chart patterns.
• Broadening formation, right-angled and ascending.
• Broadening formation, right-angled and descending.
• Rectangle tops
• Rectangle bottoms

-- Thomas Bulkowski

More

See Also

• Partial rises predict downward breakouts
• Partial declines predict upward breakouts.
• Confirmation. How often does buying before confirmation work?
• Yes, you can improve trading results by buying before confirmation. Here's how.
• Drawing 3 point channels. What's involved and how is it done?
• Market direction. 7 tips to determining.
• Trading cycles help time your entries and exits.
• Trend change detection using a triangle apex.

 

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