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: 2/12/25.
This article discusses the bearish turn-key reversal chart pattern, including what to look for and how it behaves in stocks and exchange traded funds (it's rare in cryptocurrency).
This chart pattern is supposed to be bearish, and it is, with 71% of stocks showing the turn-key pattern having downward breakouts. However, if you were to short the pattern on a downward breakout in a bull market using this pattern, in an uptrend, you'd lose $96.49, on average, per trade (1,282 trades). Downtrends are even worse with trades losing an average of $100.47 (994 trades). In bear markets, the results are the same. Both up and downtrends leading to the pattern result in losing money per trade using the turn-key pattern.
This article describes the tests of this pattern in a bull market with upward breakouts to match the other small pattern testing configurations.
The results reported below are consistent and clear. Avoid trading using this pattern. It underperforms the benchmark.
The following table shows the identification rules, and are self-explanatory. Also refer to the adjacent chart.
| Characteristic | Discussion |
| Four Bars | This pattern is four price bars long. |
| Bar 1 | Any price bar. |
| Bar 2 | Price makes a higher high (above bar 1), but closes below bar 1's close. |
| Bar 3 | Price posts a lower low (below bar 2's low), and closes above bar 2's close but remains below bar 1's close. |
| Bar 4 | Makes a higher high (above bar 3) but a close below bar 3's close. |
| Alternate | Bar 4 can have these rules: Bar 4 closes below the prior day's low (not included in the tests reported for this article. However, tests showed this makes performance worse) and below bar 2's close (included in tests for this article. I didn't check if this addition makes performance worse). |
| Breakout | Breaks out downward 71% of the time in stocks, but I tested it with upward breakouts only (for this article). |
For tests in stocks, ETFs, and cryptocurrency, I used these rules.
The chart shows an example trade in 3M. The red box highlights the turn-key reversal pattern. It is difficult to see if bar two is higher than bar one, but it is (by a penny).
An upward breakout triggers a buy stop to enter the trade. However, the uptrend never takes hold and the stock drops, hitting the stop loss order for a losing trade.
| Metric | Turn-Key In Uptrend | Uptrend Benchmark | Turn-Key in Downtrend | Downtrend Benchmark |
| Trades | 536 | 5,794 | 409 | 5,187 |
| Average profit/loss per trade | $46.68 | $88.58 | $88.73 | $100.27 |
| Win/loss ratio | 38% | 41% | 42% | 42% |
| Average hold time (days) | 19 | 26 | 19 | 26 |
| Winning trades | 206 | 2,368 | 173 | 2,154 |
| Average gain of winners | 8% | 9% | 8% | 10% |
| Average hold time of winners (days) | 27 | 36 | 26 | 37 |
| Losing trades | 330 | 3,426 | 236 | 3,033 |
| Average loss | -4% | -5% | -5% | -5% |
| Average hold time of losers (days) | 18 | 22 | 14 | 23 |
Because of the identification rules for this pattern, we find one-tenth the number of trades compared to the benchmark. Those trades with upward breakouts underperform regardless of the direction of the inbound price trend. Avoid trading this pattern in stocks.
I show a sample trade in iShares U.S. Aerospace & Defense ETF (exchange traded fund, ITA).
The day after the pattern ends, the buy stop triggers the entry. Price rises and eventually makes it up to the target exit where a limit order closes out the trade for a profit.
The following table shows the results of 94 exchange traded funds (ETFs) instead of common stocks, using the same testing methodology.
| Metric | Turn-Key In Uptrend | Uptrend Benchmark | Turn-Key in Downtrend | Downtrend Benchmark |
| Trades | 87 | 6,926 | 58 | 5,676 |
| Average profit/loss per trade | ($2.34) | $85.22 | $55.81 | $83.76 |
| Win/loss ratio | 37% | 44% | 41% | 43% |
| Average hold time (days) | 18 | 28 | 18 | 28 |
| Winning trades | 32 | 3,018 | 24 | 2,441 |
| Average gain of winners | 5% | 7% | 6% | 7% |
| Average hold time of winners (days) | 26 | 38 | 26 | 44 |
| Losing trades | 55 | 3,908 | 34 | 3,235 |
| Average loss | -3% | -4% | -3% | -4% |
| Average hold time of losers (days) | 18 | 22 | 14 | 26 |
This pattern is a stinker in ETFs, too. Avoid trading this in ETFs.
The pattern doesn't appear often enough in cryptocurrencies to be worth reporting.
-- Thomas Bulkowski
Other 4-bar patterns
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