As of 12/20/2024   Indus: 42,840 +498.02 +1.2%     Trans: 15,892 +32.54 +0.2%     Utils: 986 +14.76 +1.5%     Nasdaq: 19,573 +199.83 +1.0%     S&P 500: 5,931 +63.77 +1.1%	YTD  +13.7%   0.0%    +11.9%    +30.4%    +24.3%	Targets    Overview: 12/12/2024     44,200 or 41,750 by 01/01/2025   16,100 or 17,700 by 01/01/2025   1,050 or 975 by 01/01/2025   20,500 or 19,300 by 01/01/2025   6,100 or 5,775 by 01/01/2025
Chart Pattern Indicator: on 12/5/24

As of 12/20/2024   Indus: 42,840 +498.02 +1.2%     Trans: 15,892 +32.54 +0.2%     Utils: 986 +14.76 +1.5%     Nasdaq: 19,573 +199.83 +1.0%     S&P 500: 5,931 +63.77 +1.1%	YTD  +13.7%   0.0%    +11.9%    +30.4%    +24.3%
Targets    Overview: 12/12/2024     44,200 or 41,750 by 01/01/2025   16,100 or 17,700 by 01/01/2025   1,050 or 975 by 01/01/2025   20,500 or 19,300 by 01/01/2025   6,100 or 5,775 by 01/01/2025
Chart Pattern Indicator: on 12/5/24

Bulkowski on Upside Weekly Reversals

(Also called Weekly Reversal Bottom)

Updated with new performance information on 11/29/24.

For more information on this pattern, read Encyclopedia of Chart Patterns First Edition, (a later edition is pictured), pages 642 to 653. Below is updated performance information based on tests in February 2013. Also note that this pattern is only in the first edition of the Encyclopedia.

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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Important Results Identification Guidelines Trading Tips Example Performance Statistics Failure Rates Measure Rule Trading Performance Trading Performance with Pattern Stop Trading Example Target Exit, Stock Performance   Target Exit, ETF Performance   Target Exit, Crypto Performance See Also

Upside Weekly Reversal

Upside Weekly Reversals: Important Bull Market Results

Upside Weekly Reversal: Identification Guidelines

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Upside Weekly Reversal: Trading Tips

Upside Weekly Reversals: Example

I show two upside weekly reversals on the weekly chart.

The first, in August, appears after price trends down and it reverses that downward trend. Price climbs thereafter.

The second upside weekly reversal shows an inbound trend that is harder to see. It's still downward but price does tend to move sideways from the October peak (if you look at the bottoms, that is).

After the reversal, price recovers.

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Upside Weekly Reversals: Performance Statistics

For the following statistics, I used 1,233 stocks, starting from December 1989 to February 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 upside weekly reversal, I found where 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 bars (11 bars total) each, before the upside weekly reversal and the same peak/valley test after the upside weekly reversal. The closest valley or peak before the upside weekly reversal is where the trend began. The closest peak or valley after the upside weekly reversal is where the trend ended.

Since this is a upside weekly reversal, I excluded all of those patterns with an upward price trend. That is, I only used those appearing after an downward price trend on the weekly chart.

The 5-bar peak or valley number tends to find major turning points.

I measured performance from the breakout price (the second week's high or low in the pattern, depending on the breakout direction) to the nearest trend peak or trend valley after the breakout.

Table 1 shows the performance of upside weekly reversals from the breakout to the trend high or trend low, sorted by the breakout direction and market type.

Despite this pattern acting most often as a reversal, those that act as continuation patterns vastly outperform the others by dropping 28% in a bear market.

Notice that the second best performance is in a bull market and after an upward breakout (gains of 19%). Both of those configurations are with the prevailing price trend. Counter-trend moves (bull market, down breakout or bear market, up breakout) perform worse.

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Upside Weekly Reversals: Failure Rates

Table 2 lists the failure rates, sorted by market condition and breakout direction along with the average rise or decline after the breakout.

A failure occurs when the stock fails to move more than 5% in the direction of the breakout.

As you might expect, the highest failures are the counter-trend moves, 19% in a bull market after a downward breakout and 18% in a bear market after an upward breakout.

The lowest failure rate, 8%, occurs in a bear market and after a downward breakout.

Upside Weekly Reversals: Measure Rule

Table 3 shows how often the measure rule works. Use the measure rule to find an estimate of how far price is likely to move.

Compute the height of the pattern and add it to the high for upward breakouts our subtract it from the low for downward breakouts to get a price target. If the value is below 0 or represents an unusually high percentage move, then it's probably wrong.

The measure rule works best after an upward breakout in a bull market (70% success), but downward breakouts in a bear market come close (69% reaching their targets).

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Upside Weekly Reversals: Trading Performance

Table 4 shows the performance based on 7,638 trades using $10 commissions per trade ($20 round trip), starting with $10,000 per trade. No adjustments were made for interest, fees, slippage and so on.

The results are sorted by bull or bear market, up or down breakouts. The trades used the same setup as listed in Upside Weekly Reversals Performance Statistics.

Here's the setup.

• Find an upside weekly reversal
• If price closes above the pattern's high, buy at the open the next week.
• If price closes below the pattern's low, short at the open the next week.
• Sell/cover when price moves 7% in the direction of the breakout.
• If price moves 7% in the direction opposite the breakout, close out the trade for a loss.

For example, in a bull market after an upward breakout from an upside weekly reversal, the net gain was $84.58. The method won 57% of the time and there were 2,405 winning trades. The average gain of winning trades was $735.42.

Forty-three percent, or 1,822 trades were losers. They lost an average of $774.52.

The average hold time was 36 days.

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Upside Weekly Reversals: Trading Performance With Pattern Stop

Table 5 shows the results of 7,619 trades, but this time, a penny below the bottom of the upside weekly reversal pattern (upward breakout) or a penny above the top of it (downward breakout) was used as a stop instead of 7%.

The average loss increased substantially. However, the win/loss ratio improved, so the net profit increased but the net loss also went up.

Upside Weekly Reversals: Trading Example

The figure shows an upside weekly reversal in Alcoa on the weekly scale.

The upside weekly reversal is shown in the inset. It appears after a downtrend.

A buy signals when the stock closes above the top of the chart pattern with an entry at the open the next week. I show the top of the pattern as a red line.

The stock climbs. A exit is placed at 7% above the buy price. I show that on the chart as another red line (the location is approximate).

If the stock failed to reach the target and dropped instead, a stop placed 7% below the buy price would have exited the position.

If the pattern stop was used, then a stop placed a penny below the bottom of the weekly reversal would have closed out the trade.

Upside Weekly Reversals: Target Exit, Stock Performance

The following tests (Tables 6 and 7) relate to a different way of testing the pattern than just discussed.

Trading using a target exit is simple to explain. Look at the adjacent chart.

I highlight the upside weekly reversal in the red box, on the weekly chart. I'm only concerned with upward breakouts in a bull market. I'm looking for price to rise above the top of the upside weekly reversal, so I'll have a buy stop priced at a penny above the top of the last price bar in the upside weekly reversal (the tall price bar). I'll place a stop loss order a penny below the bottom of the upside weekly reversal.

The pattern should be identified correctly, including a downward price trend leading to the start of the weekly reversal (I used linear regression, so it may be difficult to identify the trend visually).

Then I wait for the action to begin. In this example, the buy stop triggered an entry. I set a target price to sell at twice the height of the pattern added to the top of the upside weekly reversal.

In this case, the stock didn't come close to the exit price. Instead, the trade was stopped out for a loss.

For a more detailed explanation of the method I used to test the upside weekly reversal, see the link.

Testing

As explained in the example above, I used a target exit placed twice as high as the height of the upside weekly reversal pattern. I placed a stop loss a penny below the bottom of the pattern.

Tables 6 and 7 show results for bull markets with upward breakouts. I used 497 stocks in the test.

Table 6. The upside weekly reversal pattern in stocks underperforms the benchmark.

Upside Weekly Reversals: Target Exit, ETF Performance

The associated chart shows an example of how I tested the upside weekly reversal pattern in exchange traded funds (ETFs).

Again, the red square shows the upside weekly reversal. This is one of those examples where my spreadsheet of data says the 5-day inbound price trend is downward (found using linear regression) but it looks upward. The day after the pattern ends, we have an upward breakout.

A stop loss a penny below the bottom of the upside weekly reversal helps limit the effects of adverse moves.

Computing the height of the upside weekly reversal (times two), added to the top of the pattern, gives a target price at which to exit. As you can see, the ETF trade was stopped out for a loss.

Testing

This is the same test as the prior one except I used 94 exchange traded funds (ETFs) instead of common stocks.

Table 7. The upward weekly reversal pattern fails to beat the benchmark. Don't trade the pattern.

Upside Weekly Reversals: Target Exit, Crypto Performance

The chart on the right shows how I tested performance in cryptocurrencies.

Here's a upside weekly reversal in the cryptocurrency, ATOM.

The square highlights the upside weekly reversal. Hidden under the red box is an upward breakout. This example shows a downtrend leading to the start of the weekly reversal.

A day later, the currency trade is stopped for a loss.

Testing

There was not enough samples of this chart pattern, so I don't report results.

-- Thomas Bulkowski

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See Also

• How did I test small patterns in stocks, ETFs, and crypto currency?
• Small pattern performance.
• Updated daily list of short patterns.
• Hook reversal, downtrend
• Hook reversal, uptrend
• Key reversal, uptrend
• Key reversal, downtrend
• Inside Days
• Outside Days
• Open-close reversal, uptrend
• Open-close reversal, downtrend
• Pivot point reversal, uptrend
• Pivot point reversal, downtrend
• Downside weekly reversals

"People with no vices usually have annoying virtues." -- British novelist Elizabeth Taylor.