As of 11/20/2024
Indus: 43,408 +139.53 +0.3%
Trans: 17,002 -26.31 -0.2%
Utils: 1,055 +1.25 +0.1%
Nasdaq: 18,966 -21.33 -0.1%
S&P 500: 5,917 +0.13 +0.0%
|
YTD
+15.2%
+6.9%
+19.7%
+26.3%
+24.1%
|
 46,000 or 43,000 by 12/01/202418,000 or 16,600 by 12/01/20241,075 or 1,000 by 12/01/202420,000 or 18,400 by 12/01/20246,100 or 5,800 by 12/01/2024 |
As of 11/20/2024
Indus: 43,408 +139.53 +0.3%
Trans: 17,002 -26.31 -0.2%
Utils: 1,055 +1.25 +0.1%
Nasdaq: 18,966 -21.33 -0.1%
S&P 500: 5,917 +0.13 +0.0%
|
YTD
+15.2%
+6.9%
+19.7%
+26.3%
+24.1%
| |
|
46,000 or 43,000 by 12/01/202418,000 or 16,600 by 12/01/20241,075 or 1,000 by 12/01/202420,000 or 18,400 by 12/01/20246,100 or 5,800 by 12/01/2024 | ||
Wide Ranging Day Upside Reversal
|
| Characteristic | Discussion |
| 1 bar | The pattern is composed of one bar. |
| Downtrend | Look for the pattern in a short-term down trend. |
| Close | The close must be within 25% of the intraday high. |
| Wide Range | Look for an unusually tall price bar. For testing, I used a high-low range on the reversal day that was at least three times the one-month average. |
| Trading Tactic | Explanation |
| Reversal | The pattern is supposed to act as a reversal of the down trend, and it does, but only 38% of the time in a bull market. In other words, look for price to continue lower most often. |
| Buy | Once price closes above the top of the pattern or below the bottom of it, buy/short at the open the next day, respectively. |
| Measure rule | The wide ranging day upside reversal fulfills the measure rule only 40% of the time (bull market, up breakout). That is, measure the height of 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 1,138 stocks, starting from January 1990 to March 2013, but few stocks covered the entire range. All stocks had a minimum price of $5. 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 wide ranging day upside 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 5 days (11 days total) each, before the wide ranging day upside reversal and the same peak/valley test after the wide ranging day upside reversal. The closest valley or peak before the wide ranging day upside reversal is where the trend began. The closest peak or valley after the wide ranging day upside reversal is where the trend ended. I compared the peak or valley to the average of the high and low price of the wide ranging day upside reversal.
The 5-bar 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 high-low prices in the five days before pattern. That caught the short-term trend.
| Market/Breakout direction | 5% Failure | Average Rise/Drop |
| Bull market, up breakout | 39% | 8% |
| Bull market, down breakout | 45% | -8% |
| Bear market, up breakout | 35% | 7% |
| Bear market, down breakout | 20% | -16% |
Table 1 lists the failure rates, sorted by market condition and breakout direction along with the average rise or drop.
A failure occurs when the stock fails to move in the direction of the breakout more than 5%.
The failure rates may appear high, but that's typical for short-term patterns like the wide ranging day upside reversal. The highest failures occur in a bull market. The 16% average drop for the bear market and downward breakout can probably be explained by few samples: 150.
| Market/Breakout direction | Success |
| Bull market, up breakout | 40% |
| Bull market, down breakout | 33% |
| Bear market, up breakout | 31% |
| Bear market, down breakout | 47% |
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 pattern to get the height. Add the height to the high or subtract it from the low to get the target. Price does best in a bear market after a downward breakout. It reaches the target 47% of the time, on average. The low percentages are due to the tall nature of the pattern.
| Market/Breakout direction | Bull/Up | Bull/Down | Bear/Up | Bear/down |
| Net profit/loss | $75.98 | $(53.46) | $(105.34) | $211.14 |
| Wins | 56% | 46% | 45% | 63% |
| Winning trades | 1,630 | 344 | 200 | 95 |
| Average gain of winners | $717.71 | $742.24 | $709.80 | $781.94 |
| Losses | 44% | 54% | 55% | 37% |
| Losing trades | 1,273 | 410 | 249 | 55 |
| Average loss | ($745.71) | ($721.08) | ($760.07) | ($774.79) |
| Average hold time (calendar days) | 27 | 25 | 15 | 10 |
Table 3 shows the performance based on 4,291 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, the net gain was $75.98 for all trades. The method won 56% of the time and there were 1,630 winning trades. The average gain of winning trades was $717.71.
Forty-four percent, or 1,273 trades were losers. They lost an average of $745.71.
The average hold time was 27 calendar days.
Notice how the gains and losses were pegged near 7%, which is how the test was setup.
The figure shows the wide ranging day upside reversal at A.
Price drops in the days leading to the wide ranging day. In this example, price opens near the bottom and closes near the intraday high, making a very tall price bar.
The next day, the stock breaks out upward by closing above the top of the wide ranging day. I show that at B.
Buy the stock at the open at C.
Not shown is a 7% profit target or 7% stop loss, both based on the entry price.
-- Thomas Bulkowski
Below are other short patterns...
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