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: 2/14/25.
This article discusses the bullish turn-key reversal chart pattern, including what to look for and how it behaves in stocks, exchange traded funds, and cryptocurrency.
Without including a alternate rule (Rule 1), this pattern underperforms the benchmark in stocks, ETFs, and cryptocurrency.
Look elsewhere for a better performing pattern.
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 low below bar 1, but closes above bar 1's close. |
| Bar 3 | Price posts a higher high (above bar 2's high), and closes below bar 2's close but remains above bar 1's close. |
| Bar 4 | Makes a lower low (below bar 3) but a close above bar 3's close. |
| Alternate | Bar 4 can have these rules. Rule 1: Bar 4 closes above the prior day's high (Rule 2:) and/or closes above bar 2's close. See the next table for details. |
| Breakout | Breaks out upward 73% of the time in stocks. |
The following table shows how the alternate rules help or hurt performance.
| Test | Uptrend Results | Uptrend Benchmark | Downtrend Results | Downtrend Benchmark |
| Rule 1: Bar 4 closes above bar 3's high | $56.35 (worse) | $88.58 | $135.47 | $100.27 |
| Rule 2: Price closes above bar 2's close | $46.97 (worse) | $88.58 | $85.30 (worse) | $100.27 |
| Rules 1 or 2 | $46.97 (worse) | $88.58 | $85.30 (worse) | $100.27 |
| Rules 1 and 2 | $56.35 (worse) | $88.58 | $135.47 | $100.27 |
Rule 2 degrades performance, so don't use it. Rule 1 only helps in downtrends. Based on similarity of the results, the rules overlap each other so the and/or testing shows the same results.
For tests in stocks, ETFs, and cryptocurrency, I used these rules.
The chart shows an example trade in DDD. The red box highlights the turn-key reversal pattern.
An upward breakout triggers a buy stop to enter the trade. However, the uptrend never takes hold and the stock eases lower, eventually tripping the stop loss order, for a losing trade.
| Metric | Turn-Key In Uptrend | Uptrend Benchmark | Turn-Key in Downtrend | Downtrend Benchmark |
| Trades | 2,111 | 5,794 | 1,869 | 5,187 |
| Average profit/loss per trade | $58.32 | $88.58 | $70.79 | $100.27 |
| Win/loss ratio | 40% | 41% | 41% | 42% |
| Average hold time (days) | 20 | 26 | 20 | 26 |
| Winning trades | 842 | 2,368 | 773 | 2,154 |
| Average gain of winners | 8% | 9% | 9% | 10% |
| Average hold time of winners (days) | 29 | 36 | 28 | 37 |
| Losing trades | 1,269 | 3,426 | 1,096 | 3,033 |
| Average loss | -4% | -5% | -5% | -5% |
| Average hold time of losers (days) | 17 | 22 | 17 | 23 |
Stocks trading this pattern underperform the benchmark, regardless of the direction of the inbound price trend. Don't trade this pattern in stocks (or include Rule 1 to improve performance).
I show a sample trade in iShares U.S. Aerospace & Defense ETF (exchange traded fund, ITA).
Two days after the pattern ends, a buy opens the trade. Unfortunately, the ETF drops almost immediately, closing out the trade for a loss.
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 | 275 | 6,926 | 172 | 5,676 |
| Average profit/loss per trade | $22.68 | $85.22 | $51.51 | $83.76 |
| Win/loss ratio | 38% | 44% | 46% | 43% |
| Average hold time (days) | 18 | 28 | 18 | 28 |
| Winning trades | 105 | 3,018 | 79 | 2,441 |
| Average gain of winners | 6% | 7% | 6% | 7% |
| Average hold time of winners (days) | 25 | 38 | 23 | 44 |
| Losing trades | 170 | 3,908 | 93 | 3,235 |
| Average loss | -3% | -4% | -4% | -4% |
| Average hold time of losers (days) | 17 | 22 | 16 | 26 |
This pattern is a stinker in ETFs, too. Avoid trading this in ETFs.
The red box shows the turn-key pattern. It has an upward breakout, trigging the buy stop. The height of the pattern determines the exit price, which sells the stock for a profit.
This is the same test as the prior one except I used 29 cryptocurrencies.
| Metric | Turn-Key In Uptrend | Uptrend Benchmark | Turn-Key in Downtrend | Downtrend Benchmark |
| Trades | 38 | 311 | 36 | 298 |
| Average profit/loss per trade | $248.20 | $358.38 | ($134.72) | $250.23 |
| Win/loss ratio | 47% | 53% | 31% | 47% |
| Average hold time (days) | 7 | 11 | 7 | 11 |
| Winning trades | 18 | 166 | 11 | 141 |
| Average gain of winners | 13% | 13% | 12% | 13% |
| Average hold time of winners (days) | 5 | 11 | 6 | 14 |
| Losing trades | 20 | 145 | 25 | 157 |
| Average loss | -7% | -7% | -7% | -6% |
| Average hold time of losers (days) | 5 | 10 | 7 | 9 |
The pattern significantly underperforms the benchmark. Avoid trading this pattern.
-- Thomas Bulkowski
Other 4-bar patterns
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